Saudi increases salaries, allowances to public sector employees and military personnel for reducing tax burden

Riyadh, January 6: Soon after entering in the new year, Saudi Arabia imposed 5% Value Added Tax (VAT) which led the cost of living too high. However, after looking at the consequences Saudi Arabia has announced to increase the salaries and allowances of public sector employees and military personnel to dip the burden of VAT.

 

Notably, Saudi Arabia’s King Salman on Friday ordered an increase in the salaries and allowances of public sector employees and military personnel to reduce the burden of the heavy cost of living after the introduction of value-added tax (VAT) and a rise in fuel prices in the kingdom.

King Salman ordered the annual bonus for civil and military employees to be paid from January 1 of this year from when Saudi Arabia implemented VAT to shore up country’s finances. According to the announcement, the Saudi army personnel fighting on the kingdom’s war with Yemen on the southern frontier will receive a 5,000 Saudi riyals (US$1,333) bonus while state employees will get a 1,000 riyals a month as a cost of living allowance for one year.

Meanwhile, King Salman has also ordered an allowance of 500 riyals for the pensioners and another 500 riyals payment for the social security beneficiaries. The King has also hiked the student allowance by 10 percent for a year and will bear the cost of VAT for citizens, availing private health and education services.

However, the Saudi government will also pay the VAT not exceeding 850,000 riyals for the purchase of a first home by Saudi citizens. After announcing the bonus, King Salman said that he issued the orders after Prince Mohammed, his son explained that the recent measures would increase the burden on some citizens. Meanwhile,

On the other side, the introduction of VAT in Saudi Arabia and UAE will adversely affect at least 70 to 80 percent of Indians working there and reduce their remittances. As per the reports, due to low oil prices, the remittances from the Gulf have already come down. Earlier it was about $35 billion which has now gone down to $30 billion. Interestingly, Saudi Arabia and the UAE introduced VAT from January 1 this year. The 5 percent levy is being applied to the majority of goods and services. Petrol and diesel, food, clothes, utility bills and hotel rooms all now have VAT applied.