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Value Added Tax


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With the coming of the New Year, a new Value Added Tax has gone into effect in both Saudi Arabia and the United Arab Emirates.

Lower oil prices have had a big impact on revenues for both governments, and the VAT is supposed to make up the difference.

Also, VAT is politically less unpopular with other taxes because it is less visible. There is no slice of the paycheck disappearing each pay period, for example. There are higher retail prices of course, but from the POV of consumers the prices disappears into the simple number charged at point of sale.

As the BBC report on the VATs says, "Gulf states have long attracted foreign workers with the promise of tax-free living." The implication seems to be that they like the fact that they attract foreign workers and they don't want to introduce revenue increasing measures that will scare them off. Thus the appeal of VATs invisibility. 
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