VAT will force Saudi retailers to cut jobs, costs – report

Companies in Saudi Arabia’s retail sector will be forced to cut their workforce following the introduction of value added tax in the country, according to reports.

Saudi Gazette cited a financial expert as saying companies in the sector would lose 5 per cent of their sales and be forced to make job cuts in the first year after the imposition of VAT, which is expected in 2017.

RMIT University accountancy researcher Dr Hassan Hekami told the publication gross domestic product would also be affected.

“It would be costlier for the private sector as they have to totally restructure their billing and accounting systems,” he said.

A second source, economic analyst Fadel Bin Saad Al-Bouainain, said the tax would be imposed on raw materials, impacting market demand.

“We can say that VAT would affect consumption of commodities and reduce sales of companies as well as their profits,” he said.

As a result, private sector employees are the most likely to see job cuts.

“I believe the new strategy of companies would focus on reducing expenditures rather than absorbing new costs,” Al-Bouainain said.

Countries in the Gulf Cooperation Council have agreed to the region-wide introduction of a 5 per cent VAT rate by 2019.

The UAE unveiled its plan for the tax in February and said more than 100 items would be exempt.