Saudi Arabia refutes reports that it is mulling income tax

Saudi Arabia has categorically denied that it is considering measures to introduce income tax within the kingdom.

The denial comes after media reports, quoting the country’s finance minister Mohammed Al Jadaan, suggested that income tax and asset sales too were being considered to boost the kingdom’s finances.

An official within the government however confirmed on Wednesday that the issue of income tax “had not previously been discussed in the cabinet or any of the governmental councils or committees,” reported the kingdom’s official communication channel, the Saudi Press Agency.

The official added that the “issue is fundamentally not for discussion.”

Bloomberg had reported earlier in the day that Saudi Arabia is accelerating plans to sell off state assets and isn’t ruling out introducing income tax as it seeks to boost state coffers hit by the slump in oil prices.

The world’s biggest oil producer could raise more than SAR50bn ($13.3bn) over the next four to five years by privatising assets in the education, health-care and water sectors, Finance Minister Mohammed Al Jadaan said Wednesday during a virtual forum organised by Bloomberg.

The government is “considering all options” to bolster its finances and while income tax isn’t “imminent” and “would require a lot of time” to prepare, the kingdom “isn’t ruling anything away for now,” he said.

The economy is set to shrink 6.8 per cent this year, according to the International Monetary Fund, in what would be the deepest contraction in over 30 years.

The government has already taken unprecedented measures to support its finances, including tripling value-added tax, increasing import fees, and canceling some benefits for government workers.

Read: Saudi moved $40bn in reserves to sovereign wealth fund PIF

“Saudi Arabia is not in austerity and we are not getting into an austerity phase,” Al Jadaan said. While the government has “re-allocated some spending,” total spending in 2020 is likely to be more than a trillion riyals, as planned.

The kingdom is also likely to have to borrow about SAR100bn more than planned this year and plans to tap the global debt market at least one more time in 2020 after so far selling $12bn in international bonds in 2020, Al Jadaan said.

With inputs from Bloomberg