Saudi Arabia may introduce income tax as economy shrinks due to coronavirus

Edited By: Palki Sharma WION
New Delhi, India Updated: Jul 24, 2020, 07:22 AM(IST)

File photo of Saudi Arabia's Crown Prince Mohammed bin Salman. Photograph:( AFP )

Story highlights

The Saudis do not pay income tax. Expats and corporates pay a 20 per cent income tax, and there is a flat 20 per cent federal tax for all.

According to the United Nations (UN), the Arab economies could shrink by 5.7 per cent due to the coronavirus pandemic. At least a quarter of the Arab population could be pushed into poverty.

In Saudi Arabia, the government is considering all options to bolster its finances. One of these options include introducing income tax as Saudi Arabia is headed towards its deepest contraction in 30 years. It is set to shrink 6.8 per cent in 2020.

Instead of helping the citizens in this grave situation, Riyadh may ask its citizens to pay income tax, according to reports.

Also watch: Healthcare and education could be privatized in Saudi Arabia

The Saudis do not pay income tax. Expats and corporates pay a 20 per cent income tax, and there is a flat 20 per cent federal tax for all.

The world's biggest oil producing nation uses petroleum revenue to provide for its nationals. However, as the crude prices are sliding and exports are down 65 per cent because of coronavirus, there is a possibility that income tax may be introduced in the country.

Tax-free countries

United Arab Emirates (UAE) citizens also do not pay any taxes. The country is rich in natural resources, so it exempts its citizens from paying taxes. Corporate tax is levied only on foreign banks and oil companies.

Qata, Kuwait and Oman, too, do not charge personal income tax for individuals. In the Caribbean country of Bahamas, even corporates do not have to pay taxes. However, Panama is the one which offers the best deal as it does not even tax offshore companies. 

High tax-rate countries

Sweden, on the other hand, has the world's highest income tax rate of 57.1 per cent. Potugal follows closely with a tax rate of 56.5 per cent, and Japan ranks third with a tax rate of 55.95 per cent. 

Denmark and Austria too join the list with 55.8 per cent and 55 per cent tax rates, respectively. India has a tax rate of 30 per cent, which seems considerate compared to these countries, but is still very high.

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