Question

“In 2020 Saudi Arabia - the standard rate of VAT increased from 5% to 15%. Discuss the welfare effects of the VAT reform and its implications for business and taxpayers”

Answer 1

Answer :- The standard rate of vat will increase to 5% to 15% from 1 July 2020. Saudi Arabia took this measures because of covid -19 and it's economic impact on country as there is decline in government revenue because of lower oil prices , rise in health care expenditure and reduction in economic activities throughout the country .

Business whose sales VAT exempt will experience increase in cost . Overall industries in saudi arbia will see rate increases except financial sectors ,rest estate and insurance sectors . Consumer will face adverse effect because of increase in VAT. Government might offer some relieving measure on items such as food and other essential utilities. Businesses will need to charge correct rate of VAT to contracts and supplies . Business will be on much pressure to assess the impact of VAT changes on business and to comply it without errors and penalties . It will create increase in cash flow for others . Businesses will have short time opportunities to bulk purchase stock before rate increases .