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Saudis greet New Year angry at Qatar, living conditions, as VAT goes live

Saudi citizens woke up today finding that the Citizen’s account, which compensates for the increase in electricity and gasoline prices and the application of VAT, has been hacked.

“Hacking of Citizen Account” on December one (2018) of the official twitter accounts associated with the Citizen Account program in Saudi (@Citizen_care) tweeted out an insulting message, twitter reported.

On December 20, 2017, the account transferred $533 million in the first monthly installment for low and middle-income families that make up approximately half of the kingdom’s population, reaching around 10.6 million beneficiaries.

The hack got Saudis more angry than ever at Qatar, whom they believed was behind the attack.

But their displeasure was not restricted to the feud that Saudi, as part of a quartet including UAE, Bahrain and Egypt, has with Qatar.

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Messages on twitter were also of Saudis saying “Salary not enough”, a criticism likely directed at the implementation of a 5% VAT, which took effect January 1st.

Saudis are facing hiked gas prices with high-grade petrol rising 127%, from 0.9 riyals or ($1.09 per gallon) to 2 riyals ($2.42 per gallon), and low-grade petrol rising 83%, from 0.75 riyals per liter to 1.37 riyals.

At least for now, there is no income tax introduced, but how does VAT impact Saudi and the UAE, the only two Gulf countries that went ahead with the tax?

Saudi VAT

According to IMF estimates, the planned VAT rate in Saudi and the UAE will raise additional revenues of some 1.5 to 3% of non-oil gross domestic product.

Even before VAT was applied, Saudi Arabia and the UAE last year imposed a 100% tax on tobacco products and energy drinks, and a 50% tax on soft drinks.

Saudi Arabia, forecasts a $21.3bn boost in revenue from the introduction of VAT, according to estimates by Bank of America (BoA) Merrill Lynch.

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The VAT will apply to a range of items like food, clothes, electronics and gasoline, as well as phone, water and electricity bills, and hotel reservations. Exemptions include domestic rent, property buyers, transport (including air travel), healthcare and schooling.

The kingdom unveiled the biggest budget in its history at $261bn in 2018 while introducing non-oil economic diversification to attract income.

Saudi projects it will generate about $209bn in revenue this year but run a deficit until 2023, according to the finance ministry.

According to the BBC, Saudi generates more than 90% of budget revenues come from the oil industry.

Saudi Aramco hopes to generate $100bn from the IPO sale of 5% of its shares, monies that will go into the sovereign public investment fund (PIF).

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The United Arab Emirates is expected to raise around $3.3bn from the tax in the first year, according to BBC.

The cost of living in the UAE is expected to rise about 1.5% this year because of the VAT, according to The National daily.

Dubai and Abu Dhabi are the most expensive cities to live in the Arab world, according to Mercer’s 2017 Cost of Living Survey.

BBC says that more than 80% of budget revenues come from the oil industry, but there are new road tolls hikes and a tourism tax being introduced in 2018.