Another arrest drama was being played in Saudi Arabia.After the protest in front of the royal palace of Riyadh against the austerity measures, eleven princes of Saudi Arabia were detained upon the decision of the heir to the throne Mohammed bin Salman. The princes protested against the government’s decision to stop providing the payment of electricity and water bills, a decision that also affects ordinary citizens. The principles were arrested “for disturbing public order”. The “maneuver” decided by Bin Salman also provides for cuts to subsidies that keep the price of petrol and foodstuffs very low and the introduction of VAT to 5 percent. This decision has caused sporadic protests, especially in the East of the country. Some believe that the princes also protested because of their cousins previous arrest, after the “anti-corruption” crackdown at the beginning of last December, when between 400 and 700 members of the royal family were arrested.
The countermove of the King
In an apparent defeat of austerity decided by his son Mohammed, yesterday King Salman issued a decree that sets the payment of 1000 riyals more per month (about 270 dollars), to state employees, after the protests for the introduction of VAT that increased prices of petrol and other basic necessities. King Salman also decided a compensation of 5,000 riyals for the soldiers involved in the war in Yemen and aid to pensioners. The alteration of the course comes from the fear that the economic reforms introduced to reduce the budget deficit, which exceeded 15 per cent of GDP in the last two years, make the anger of a population accustomed for decades to have almost everything free.
This year the United Arab Emirates and Saudi Arabia were the first two Gulf countries to impose a tax on consumer goods. Until a few years ago taxes did not exist in oil monarchies and citizens had homes, water, electricity, gasoline for free or at very low prices thanks to state subsidies.
Taxes and deficits after the collapse of crude oil
After the collapse of the crude oil prices in 2014, a series of maneuvers eliminated part of the subsidies and the adjusted prices. The “correction” of King Salman will cost a state additional 23 billion riyals (over six billion dollars).
However, the Saudi and Emirate governments now exclude income taxes, which have always been zero. Kuwait, Bahrain, Qatar and Oman are planning to introduce VAT, starting in 2019 or 2020.