Saudi Arabia started on Monday the hike of local gasoline prices and electricity tariff and the activation of the value-added tax (VAT).
About gasoline, the Octane 91 will sell for 1.37 riyals (0.36 U.S. Dollar) a liter, up from 0.75 riyals (0.2 U.S. Dollars), while Octane 95 will sell for 2.04 riyals (0.544 U.S. Dollars) a liter, up from 0.90 riyals (0.24 U.S. Dollars), Al Arabiya local news reported on Monday.
The price of diesel for trucks remains unchanged. This is the second hike since the beginning of disturbance in oil prices in the international markets.
The country also introduced on Monday the VAT within the framework of a unified agreement endorsed by the member states of the Gulf Cooperation Council (GCC). “The imposition of VAT will help to raise tax revenues of the Saudi government to be utilized for infrastructure and developmental works,” said Mohammed Al-Khunaizi, a member of the Shoura (consultative) Council according to Arab News.
It is a five percent tax on most goods and services to boost revenue, like food, clothes, electronics and gasoline, as well as phone, water and electricity bills, and hotel reservations.
Meanwhile, the country has defended the decision to enforce the new electricity tariff to raise economic efficiency, rationalize consumption of natural resources and boost the contribution of the non-oil sector.
The savings from the new price tariffs will partly be used to support a new citizen account program to protect low to middle-income families from austerity measures including the VAT and other cost increases.
All these steps are part of a major revamp in the Saudi economy structure to make the country less dependent on oil revenues.