Davos — Saudi Arabia will “ultimately” consider cutting the rate of value-added tax (VAT), which was increased to 15 percent from five percent in 2020, Minister of Finance Mohammed Al-Jadaan said on Tuesday.
On Monday, Saudi Minister of Finance Mohammed Al-Jadaan spoke at WEF, the World Economic Forum in Davos.
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The Saudi Arabia government tripled the VAT rate to shore up finances hit by low oil prices as the COVID-19 pandemic hit global demand.
Talking to Reuters on the sidelines of the Davos World Economic Forum, Al-Jadaan said; “We will eventually consider cutting the VAT, but at the moment, we are still refilling the reserves.”
“Saudi policy on fiscal sustainability would ensure that reserves do not fall below a certain percentage level of the country’s gross domestic product (GDP).
He revealed that the Kingdom is at the final stages of designing its fiscal sustainability policy.
“According to that policy, our reserves will not go below a certain percentage level of GDP. The reserve figure would be in the double digits.”
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Al-Jadaan said excess money could go toward PIF, the Public Investment Fund. PIF is a $600 billion sovereign wealth fund, and NDF, the National Development Fund.
“In the last five years, we have spent SR1 trillion from reserves, and we are still replacing these,” he said.
On Monday, Al-Jadaan said he expected the Kingdom to witness 7.4 percent growth in 2022. He also anticipated inflation in Saudi Arabia to be around 2.1-2.3 percent by the end of the year.
The minister reaffirmed the Kingdom’s determination to continue its reforms vigorously.