Saudi hikes Petrol prices
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Riyadh: Saudi Arabia has launched a major element of its economic reform plans by increasing petrol prices, and electric tariff and activating of Value-Added Tax (VAT) with effect from 1 January, agencies reported.
Octane 91 price will go up from current 0.75 to 1.37 riyals, and that of Octane 95 from 0.90 riyal to 2.04 riyals a liter. However, the price of diesel for trucks will remain unchanged. This is the second time fuel prices have been hiked since the beginning of the crisis brought in by falling oil prices in the international market.
Starting 2018, Saudi also introduced within the framework of a unified agreement endorsed by the countries of the Gulf Cooperation Council (GCC). Government sources are advocating VAT on the grounds that it will help to raise tax revenue of the government necessary for infrastructure and developmental works.
Over the last few years, GCC states in general and the Saudi government in particular has been targeting increase in non-oil revenues, at the face of falling oil prices in the near term and the uncertain future of fossil fuels in the world market in the long term. And the general justification given by the rulers is that such shift from the highly subsidized utilities' pricing regime is necessary to raise economic efficiency, rationalize consumption of natural resources and boost the contribution of the non-oil sector.
Under the VAT regime, most goods and services will attract five per cent tax, and will cover food, clothes, electronics and gasoline. It will also include phone, water and electricity bills and hotel reservations.
The additional revenue from the new price tariffs will partly be used to support a new citizen account program to protect low to middle-income families from austerity measures including the VAT and other cost increases.
However, the kingdom will slow plans to eliminate subsidies for a wide range of energy products, according to a new long-term fiscal plan in the 2018 state budget released last month, as reported by Reuters.
King Salman formally announced on Dec. 20 that the target date for eliminating the government’s budget deficit would be pushed back to 2023 from the original target of 2020, in order to reduce the sudden adverse impact on economic growth.