In 2018 Saudi Arabia imposed a Value-Added Tax (VAT) on the supply of goods and services at a standard rate of 5%. Discuss the welfare effects of the VAT reform, and its implications for businesses and taxpayers.
The country’s economy comprises the activities of sectors like agriculture, oil and gas trade, information and communication among others that contributes significantly to the Gross Domestic Product (GDP). Tax rates therefore are introduced to generally help raise the revenue for the government and provide production means. The Value added tax (VAT) in this case has impacted the business enterprises significantly in terms of compliances burden and longer period it takes to refund the taxpayers.