Management of Value-Added Tax System in Saudi Arabia: Issues, Economic Benefits, Operational Constraints and Policy Recommendations

Abstract

Following the announcement of a unified Value-Added Tax (VAT) across the GCC countries (Bahrain, Kuwait, Oman, Qatar, Saudi Arabia and the United Arab Emirates) and the subsequent ratification of agreement for its introduction in 2018 by Saudi Arabia as a new tax system in 2018, there arose critical issues that need to be addressed with regards to VAT. This conceptual paper discusses emerging issues in the management of VAT, economic benefits and constraints, and concludes with policy recommendations. In accomplishing the research objective, the paper adopts a qualitative research method, which entails reviewing journal articles, texts and other relevant online resources on VAT. The extractions from afore-mentioned sources were analysed through critical discourse analyses. The paper established that VAT obviously became a front-burner tax in the GCC region because of the difficult economic, social and political realities caused by dwindling oil revenues in the face of rising populations and growing expectations of the citizens. The paper concludes that although the Kingdom has commenced implementation of VAT, but its development by the policymakers requires stronger education for better understanding of the economic benefits and constraints, sensitisation for acceptance by the citizens, and cooperation of businesses and citizens for compliance and collection to meet the fiscal objectives of this new tax system in a region with little history of consumption tax.