Saudi Arabia considering subsidy cuts, VAT

Also mulling over taxes on unhealthy goods like cigarettes and sugary drinks

Saudi Arabia may reduce energy and water subsidies for wealthy citizens, impose a value added tax (VAT) and taxes on unhealthy goods like cigarettes and sugary drinks, Deputy Crown Prince Mohammed bin Salman was quoted as saying on Wednesday.

The world's top oil exporter has previously said it was studying increases in domestic energy prices, the introduction of VAT and the installation of nuclear and solar power.

Low oil prices and expected deficits in coming years have spurred a new focus on reforms in the conservative Islamic kingdom with the aims of diversifying the economy away from a dependence on crude revenue.

"The key challenges are our overdependence on oil and the way we prepare and spend our budgets," he said in an interview with the New York Times.

The newspaper reported that he also said he would privatise and tax mines and undeveloped land, and intended to reduce domestic oil consumption by installing nuclear and solar electricity capacity, without giving further details.

Mohammed bin Salman, who is also defence minister, heads a supercommittee on the kingdom's economy and development as well as a National Performance Centre that oversees efficiency in all government ministries.

Under King Abdullah, who died in January, Saudi Arabia privatised big state companies, opened main sectors of the economy to private and foreign investment, joined the World Trade Organisation and reformed labour laws.

However, economists say the government can do more to strengthen the role of Saudi nationals in the private sector economy, including via education reform, and to make the government more efficient.  

 

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