In order to ease the burden and impact of low crude oil prices, the government of Saudi Arabia is planning to accelerate the reduction of subsidies and introduce higher taxes...
This step aims to raise hundreds of billions of dollars by 2020, according to Deputy crowned Prince Mohammed bin Salman. Last year, the revenue of this country which did not come from oil increased by about 35 percent and reached 44 billion dollars, as we learn from preliminary data. "Large packages of programs are aimed at restructuring the sector which bring us revenue," said the prince.
This proposed measure will include the restructuring of subsidies, the introduction of new value-added tax and luxury items, as well as sweet and energy drinks. The government of this country is also currently discussing plans to introduce a new program, which would be similar to the Green Card project of the United States, in order to collect as much revenue.
Last week, the Saudi government said it is considering selling its stake in state energy company Saudi Aramco, in order to transform it into an industrial conglomerate. Riyadh also wants to create a fund of two trillion sovereign wealth to help this kingdom to move away from dealing with oil.
Prince Mohammed expects value tax to make about 10 billion per year by 2020, with the restructuring of subsidies, which will bring the expected 30 billion a year. Companies will have to pay a fee if they want to employ more foreigners than their quota allows it, so in that way the green card program could bring in about $ 10 billion annually.
The country currently has a record high budget deficit, which this year, if all goes as expected, will be about $ 87 billion. Their foreign reserves, the third largest in the world after China and Japan, fell to 640 billion, compared to last year's amount of 737 billion.
The debt of this country can rise to 30-35 per cent of gross domestic product by 2020, compared to less than two percent last year, according to Minister of State Mohammed Bin Abdul Malik Al-Sheikh. "We'll have to take a loan, but by 2020 we plan to have a balanced budget," the minister said.
Given the fact that the sale of oil accounts for almost 80 percent of revenue for the Kingdom, the crisis of low prices had a huge impact and the impact on their economy.
