Saudi Arabia: New taxes on tobacco and soft drinks June 10

Event

Saudi Arabia has announced that new taxes on tobacco, sodas, and other consumer products will come into effect starting Saturday, June 10, and could reach as high as 100 percent. The new taxes come weeks after the government announced that a separate 5 percent VAT (value added tax) would be imposed starting in January 2018.

The controversial move, expected to bring in between USD 2.1 billion and USD 2.7 billion in revenue, came a few days after United States President Donald Trump’s visit to Saudi Arabia, during which he signed a series deals requiring investment by the Saudis. Saudis have complained about the new taxes, particularly on social media. Demonstrations to protest the above measures are possible in the coming days.

Context

Saudi Arabia’s economy, historically dependent on the oil industry, has suffered from the sharp decline in global oil prices and an increasingly costly war in Yemen. The government has already made cuts to public spending and reduced pay and benefits for its employees. Government debt will make up 19 percent of the country's GDP this year, up from 5.9 percent in 2015.

In response, government officials have approved austerity measures that will be implemented within the next several years.

Advice

Individuals in Saudi Arabia are advised to monitor the situation via local media and to avoid all protests and rallies as a precaution.

On a separate note, due to the high terrorist risk that continues to threaten the entire country, those present are advised to exercise caution at all times, to keep a low profile, and to avoid public places lacking adequate security measures or locations deemed particularly likely to be targeted in an attack (e.g. official buildings, military zones). As a reminder, the majority of Western governments advise their nationals against travel to Saudi Arabia's southern provinces as well as areas near the Iraqi border.