VAT

The introduction of value-added tax (VAT) next year will directly impact the prices of commodities and services, analysts said. Al-Zaidi, a Financial ablyst, said “The price increase will reduce the demand for goods, and this will have a negative effect on companies, most of which will likely take several measures to keep their business”. He hoped the price rise would not affect the quality of goods and services. “If it happened, it is a negative indication. However, the price hike will push consumers to find ways to save money”, he said. Businesses must register for VAT by the deadline of Dec. 20, and the official introduction starts on Jan 1. He anticipated that companies will be keen to improve their services at competitive prices, especially with the opening of international markets through e-commerce. He stressed that the best service-providers with the lowest costs will succeed in the market, while other businesses will fail. Al-Zaidi, who is also the director of the Jeddah-based Al-Zaidi Financial Education Center, said that it is possible that the government will impose additional taxes on other products or increase VAT from 5 percent. Al-Zaidi anticipated that small and medium-sized companies will find it difficult to adapt to VAT, making it difficult to significantly reduce their expenses to survive. As for imposing VAT on private education, Al-Zaidi said that investors in this sector would reduce fees to retain their market share. “Otherwise, their investment would be severely affected”, he said.