Saudi Arabia's just-approved economic reform plan includes more than tripling government earnings from non-oil revenues over the next five years and cutting public-sector salaries.
Saudi Arabia says it wants to more than triple the amount of money the government gets from non-oil revenues over the next five years.
And it will also cut public-sector salaries and subsidies on water and electricity.
Those are the headlines from Riyadh’s just-approved National Transformation Plan, also known as ‘Vision 2030’.
There will be VAT from 2018 and residents will also have to pay income tax for the first time but one of its prime architects stressed that will not apply to Saudi citizens.
Minister of State Mohammed Al al-Sheikh, who is also a member of the Economic Development Council, told reporters: “The government will not impose income taxes on its citizens, that has been previously announced in the Vision 2030 plan, and it was clear and explicit that there will not be any move to impose any taxes on citizens.”
The austerity plan is intended to restructure the Saudi economy so that it can survive in an era of low oil prices.
Currently more than 70 percent of government revenue comes from oil sales and about two-thirds of Saudis work for the state.
Economists expressed concerns the measures could cause a deep slowdown in the country’s economy.
“The announcement is positive in that it shows a commitment to fiscal reform – the government is clearly focusing on it,” said Monica Malik, chief economist at Abu Dhabi Commercial Bank.
“But the key is whether the plan can be implemented, and that will be difficult. It’s not clear that the time scale is doable.”