Saudi Arabia offers monthly handout to soften public over tax hike
Saudi Arabia has ordered new monthly payments to civil servants and soldiers in an effort to soften the impact of price hikes and new taxes introduced under the kingdom’s economic reform plans.
The Saudi monarchy - driven by Crown Prince Mohammed bin Salman - this week doubled petrol prices and introduced a VAT tax to try to take on a 195 billion riyal (£38 billion) budget deficit caused by years of low oil prices.
But wary of public anger over the price rises, the government announced Saturday that it was taking steps to address “the increase in the cost of living on some segments of our population as a result of the necessary measures taken by the State to restructure the economy”.
The populist measure was framed as an initiative by Crown Prince Mohammed, often known by his initials MBS, who is expected to take over from his 82-year-old father King Salman in the near future.
The new deal means that soldiers and civil servants will receive monthly payments 1,000 riyals (£197), while troops serving on the Yemeni border would receive a one-off bonus of 5,000 riyals.
Other measures were introduced to help students, pensioners and some people seeking specialist medical care.
It was not clear how much the package would cost but the Saudi government insisted that “economic reforms are proceeding as planned”.
A calculation by Reuters estimated that it would cost the treasury around 23 billion riyals, compared to a projected budget deficit for 2018 of 195 billion riyal.
The announcement came in the same week as thousands of protesters in neighbouring Iran took to the streets in anger over rising prices and unemployment among other grievances.
Saudi police reportedly arrested 11 princes this week after they gathered at a royal palace in Riyadh to protest against the government’s austerity measures - which included no longer paying royal utility bills.
The online news website Sabq said the princes had gathered at the Qasr a-Hokm, a historic royal palace, demanding the cancellation of a royal decree that stopped state payment of water and electricity bills for royal family members.
They were also demanding compensation for a death sentence issued against a relative, the site said.
Crown Prince Mohammed ordered the arrest of dozens of senior princes and businessmen in November in what the government said was an anti-corruption drive. Critics said the arrests were a manoeuvre by the 32-year-old to crush potential rivals and consolidate his own power.
Crown Prince Mohammed has presented himself as a moderniser and a scourge of the corruption which has plagued Saudi Arabia’s economy for decades.
However, it has emerged that he shares a taste for luxury with many of his fellow Saudi princes. In 2015 he reportedly bought a £452m yacht on an impulse purchase. He reportedly also owns a £221 chateau outside Paris - the world’s most expensive home.
