ISLAMABAD: Saudi Arabia and the United Arab Emirates (UAE) plan to impose a 5 percent tax next year on most goods and services to boost revenue after oil prices collapsed three years ago.
The value-added tax (VAT) will apply to a range of items like food, clothes, electronics and petrol, as well as phone, water and electricity bills, and hotel reservations, private news channel reported.
Some exemptions will apply for big-ticket costs like rent, real estate sales, certain medications, airline tickets and school tuition.
Higher education will be taxed in the UAE. Extra costs such as uniforms, books, school bus fees and lunch will also be taxed, as well as real estate brokerage costs for renters and buyers.
The cost of living in the UAE is expected to rise about 2.5 percent next year because of the VAT, salaries, meanwhile, remain the same.
Other Gulf countries are also expected to roll out their own VAT scheme in the coming years.
The decision could affect the countries’ reputation with foreign workers, many of whom have been lured by a tax-free lifestyle. Foreigners make up about one third of Saudi Arabia’s population and far outnumber locals in the UAE.
