Early data recommends that the impact of the VAT (value-added tax) on inflation in both Saudi Arabia and the UAE has been largely contained, according to the most recent PwC on Middle East Economy. The senior economist, Richard Boxshall at PwC Middle East, mentioned in the report, told the impact of VAT in Saudi Arabia was “limited”, directly because of it increased more revenue which was initially expected. He told, “Overall, the new tax policy has been relatively successful in diversifying government revenue without producing excessive inflation ”. He also added, “ A fuller picture will emerge over the next six months or so, including from studying Bahrain, which joined the VAT club this year.”
The preliminary fiscal outturn data of Saudi Arabia released alongside the budget in December evaluates that VAT raised up to $12.2bn in 2018- around a third more than it had assumed. In a projection in January 2018 made by the General Authority of Zakat and Tax, the increasing amount is equivalent to around 1.6 % of GDP. Boxshall told, “This suggests a relatively high efficiency of the collection in relation to private consumption by international standards ”. He also added, “The VAT brought in more funds than the expat levy and excise taxes combined, and triple the amount from taxes on income and capital gains. ”
In the concern of the availability on the UAE, Boxshall told it is supposed to be higher in the respective terms than Saudi Arabia, “because of private consumption makes up a larger share of the economy. ” seventy percent of the revenues will be allocated to each of the seven emirates, providing a potential and significant boost for some.
Boxall told 2018 was one of the best five years for the oil exporters of the Middle Eastern country, pushed by two main factors- increasing oil prices and rising the government spending.