Question

How may it affect Saudi Economy if an income tax is imposed in KSA?

Answer 1

There is no individual income tax scheme in Saudi Arabia. Income tax is not imposed on an individual's earnings if they are derived only from employment in Saudi Arabia. However, if the kingdom considers imposing income tax on foreign residents it can raise non-oil revenues and cut spending to fund its $72bn plan to diversify the economy.

Riyadh, which is scrambling to raise funds needed for wide-ranging reforms from fiscal and investment policy to social initiatives, is taking the unprecedented step of tapping global bond markets and reprioritizing domestic spending. Income tax on the one-third of residents who are non-Saudis would raise a significant amount of non-oil revenue for the government. But it could also make luring expatriates to the conservative kingdom more difficult. Like other Gulf states, Saudi’s income tax-free status is key to attracting foreigners. “The allure of Gulf countries for many expatriates is how much they can save, not spend, and how much they can remit back to their countries.” If income tax is applied, there will increasingly be expectations of greater standards of living.      

Saudi Arabia is The world's biggest oil producing nation and uses petroleum revenue to provide for its nationals. However, as the crude prices are sliding and exports are down 65 per cent because of corona virus, there is a possibility that income tax may be introduced in the country.