Saudi Arabia triples VAT in unpopular corona-led austerity push

News Network
July 1, 2020

Riyadh, Jul 1: Saudis braced Wednesday for a tripling in value added tax, another unpopular austerity measure after the twin shocks of coronavirus and an oil price slump triggered the kingdom's worst economic decline in decades.

Retailers in the country reported a sharp uptick in sales this week of everything from gold and electronics to cars and building materials, as shoppers sought to stock up before VAT is raised to 15 percent.

The hike could stir public resentment as it weighs on household incomes, pushing up inflation and depressing consumer spending as the kingdom emerges from a three-month coronavirus lockdown.

"Cuts, cuts, cuts everywhere," a Saudi teacher in Riyadh told AFP, bemoaning vanishing subsidies as salaries remain stagnant.

"Air conditioner, television, electronic items," he said, rattling off a list of items he bought last week ahead of the VAT hike.

"I can't afford these things from Wednesday."

With its vast oil wealth funding the Arab world's biggest economy, the kingdom had for decades been able to fund massive spending with no taxes at all.

It only introduced VAT in 2018, as part of a push to reduce its dependence on crude revenues.

Then, seeking to shore up state finances battered by sliding oil prices and the coronavirus crisis, it announced in May that it would triple VAT and halt a cost-of-living monthly allowance to citizens.

The austerity push underscores how Saudi Arabia's once-lavish spending is becoming a thing of the past, with the erosion of the welfare system leaving a mostly young population to cope with reduced incomes and a lifestyle downgrade.

That could pile strain on a decades-old social contract whereby citizens were given generous subsidies and handouts in exchange for loyalty to the absolute monarchy.

The rising cost of living may prompt many to ask why state funds are being lavished on multi-billion-dollar projects and overseas assets, including the proposed purchase of English football club Newcastle United.

Shopping malls in the kingdom have drawn large crowds in recent days as retailers offered "pre-VAT sales" and discounts before the hike kicks in.

A gold shop in Riyadh told AFP it saw a 70 percent jump in sales in recent weeks, while a car dealership saw them tick up by 15 percent.

Once the new rate is in place, businesses are predicting depressed sales of everything from cars to cosmetics and home appliances.

Capital Economics forecast inflation will jump up to six percent year-on-year in July, from 1.1 percent in May, as a result.

"The government ended the country's lockdown (in June) and there are signs that economic activity has started to recover," Capital Economics said in a report.

"Nonetheless, we expect the recovery to be slow-going as fiscal austerity measures bite."

The kingdom also risks losing its edge against other Gulf states, including its principal ally the United Arab Emirates, which introduced VAT at the same time but has so far refrained from raising it beyond five percent.

"Saudi Arabia is taking massive risks with contractionary fiscal policies," said Tarek Fadlallah, chief executive officer of the Middle East unit of Nomura Asset Management.

But the kingdom has few choices as oil revenue declines.

Its finances have taken another blow as authorities massively scaled back this year's hajj pilgrimage, from 2.5 million pilgrims last year to around a thousand already inside the country, and suspended the lesser umrah because of coronavirus.

Together the rites rake in some $12 billion annually.

The International Monetary Fund warned the kingdom's GDP will shrink by 6.8 percent this year -- its worst performance since the 1980s oil glut.

The austerity drive would boost state coffers by 100 billion riyals ($26.6 billion), according to state media.

But the measures are unlikely to plug the kingdom's huge budget deficit.

The Saudi Jadwa Investment group forecasts the shortfall will rise to a record $112 billion this year.

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News Network
March 12,2024

Iran.jpg

Congratulating the Muslim world on the occasion of Ramadan, Iran calls on Muslim countries to unite against the Israeli regime's ongoing genocidal war against the Gaza Strip on the occasion of the arrival of the holy fasting month.

"I cordially congratulate the honorable Iranian nation, the entire Muslims of the world, and my counterparts in Muslim countries on the occasion of the emergence of the blessed month of Ramadan," Foreign Minister Hossein Amir-Abdollahian wrote in a post on X, formerly Twitter, on Monday.

"Gaza's developments showed that, as the common ideal of all Muslims, the issue of Palestine rests at the top of the Muslim world's [list of] priorities," he added.

The holy month, he added, can serve as a "premium opportunity" for Muslim countries "to effectively take the initiative, under the aegis of all-out unity and convergence, towards stopping the apartheid Zionist regime's genocide and war crimes in Gaza."

Amir-Abdollahian, meanwhile, expressed confidence that "the resistance and the Palestinian people are the main victors of this arena."

Israel launched the war on the Gaza Strip on October 7 after Palestinian resistance groups carried out a surprise retaliatory operation into the occupied territories.

Concomitantly with the war, the regime has been enforcing a near-total siege on Gaza, which has reduced the flow of foodstuffs, medicine, electricity, and water into the Palestinian territory into a trickle. Earlier this month, the United Nations warned that in the absence of any changes in the regime’s ongoing genocidal war, the coastal sliver was on course to experience all-out famine.

So far during the military onslaught, the regime has killed more than 31,112 Gazans, most of them women, children, and adolescents.

Also on Monday, UN Secretary-General Antonio Guterres urged the Israeli regime to honor the spirit of the holy month by "silencing the guns."

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News Network
March 15,2024

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The leader of Yemen’s Houthis has said that the Yemeni armed forces will continue their retaliatory operations against Israeli-affiliated commercial vessels, preventing the passage of the ships even through the Indian Ocean and through the Cape of Good Hope.  

About 34 Houthi fighters have been killed since the Yemeni armed forces began to attack shipping lanes in solidarity with the people of Palestine under attack in Gaza by Israel, Ansarullah leader Abdul Malik al-Houthi said in a televised speech on Thursday.

Yemeni forces have repeatedly launched drones and missiles against Israeli and Israel-bound ships since mid-November, saying they are acting in solidarity with Palestinians against Israel's war on Gaza.

Al-Houthi said 73 ships have been targeted in Yemeni operations in support of Gaza so far, adding rarely does any ship associated with the Israeli enemy pass through Bab al-Mandab.

“This week, support operations included 12 operations targeting ships and barges, executed with a total of 58 ballistic and cruise missiles and drones in the Red Sea, the Arabian Sea, and the Gulf of Aden,” he said.

“Our operations this time reached unprecedented ranges, with 3 operations reaching the Indian Ocean, by the grace of Allah,” he added. “The total number of targeted ships and barges reached 73.”

Al-Houthi said that the operations will continue as long as the aggression and siege on Gaza persist.

The United States and Britain began striking Yemen in January in order to dissuade the country from targeting Israeli ships which carry arms and logistics for the onslaught on the besieged Gaza Strip.

Al-Houthi said the Americans and the British have received “painful blows” from the Yemeni armed forces in retaliation.

The American-British “aggression will not affect the escalating course of our operations in terms of range, momentum, precision, and strength,” said Al-Houthi.  

“What can stop the Yemeni military’s maritime operations is only the cessation of aggression and siege on Gaza,” he noted.

The American stubbornness and escalation of aggression result in only one outcome: the expansion of the conflict, the widening of the circle of war and events, and the tension of the situation at the regional level in general, he stated.

He went on to say that the Yemeni armed forces will continue and effectively expand the range of the operations to reach areas and locations that the enemy never expected.

Al-Houthi said what insures the navigation security in the Red Sea is for any country not to participate in the Israeli aggression against Gaza.

He said the Americans and those who drag the United States towards the militarization of the Red Sea are the ones who undermine international navigation.

“By the grace of Allah and His assistance, we aim to prevent the passage of ships associated with the Israeli enemy even through the Indian Ocean and from South Africa towards the Cape of Good Hope,” he stated.

“For this important, advanced, and significant step, we have begun to implement our operations related to it through the Indian Ocean and from South Africa towards the Cape of Good Hope,” he said.

There is absolutely no choice for the American and the British but to stop the aggression on Gaza and stop starving the people in Gaza, he declared.

“Our human conscience, our religion, our morals, our dignity, our pride, our belonging to Islam, prohibit us from watching the oppression of Palestine or remaining silent about it,” said Houthi.

He added that the Yemeni military is in continuous development of capabilities and in constant expansion of the stance in its range, effectiveness, and impact.

“The American's actions this week, involving aerial bombings and naval shelling, amounted to 32 bombing raids and strikes, which, as usual, were unsuccessful,” he revealed.

“The impact of the American raids and bombings is negligible regarding our missile and drone capabilities and in terms of continuing operations effectively to counter it, and in preventing ships associated with the Israeli enemy,” he stated.

He concluded by saying that the Yemeni armed forces are continuously escalating, and increasing capabilities to attack enemy ships. “No matter what the Americans do, they will not be able to stop us from supporting the Palestinian people in Gaza.”

Yemenis have declared their open support for Palestine’s struggle against the Israeli occupation since the regime launched a devastating war on Gaza on October 7 after the territory’s Palestinian resistance movements carried out the surprise Operation Al-Aqsa Storm.

The Yemeni Armed Forces have said they won’t stop retaliatory strikes.

The maritime attacks have forced some of the world’s biggest shipping and oil companies to suspend transit through one of the world’s most important maritime trade routes.

Tankers are instead adding thousands of miles to international shipping routes by sailing around the continent of Africa rather than going through the Suez Canal.

Since the start of Israel's genocidal war following Operation al-Aqsa Storm by Gaza-based resistance movements on October 7, 2023, more than 31,000 Palestinians, including many women and children, have lost their lives.

The Israeli military offensive has left a trail of destruction in Gaza, leaving hospitals in ruins and displacing around half of its 2.4 million residents.

Israel has additionally enforced a comprehensive blockade on the coastal sliver, severing the supply of fuel, electricity, sustenance and water to the population residing there.

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News Network
March 8,2024

gazawomen.jpg

As the world marks International Women's Day, the government media office in Gaza has mourned 8,900 Palestinian women killed by Israel since October amid the silence of the international community.

In a statement issued on Friday, the media office said Israel’s genocidal war on Gaza, which began in October, has so far killed 8,900 Palestinian women and injured more than 23,000 others, with 2,100 still missing.

“On March 8, the world celebrates International Women's Day, honoring women for their achievements and struggle. However, Palestinian women continue to pay a heavy price for freedom and dignity.”

The statement said Israel kills Palestinian women “in cold blood”, while “the world stands idly by, witnessing this grave violation against Palestinian women without lifting a finger.”

The office noted that Israel’s war has also left over half a million Palestinian women displaced and living under “extreme difficulties”, with no access to basic necessities such as food and medicine.

According to the statement, the war has also “made 60,000 pregnant women live a harsh and extremely difficult life, lacking the most basic healthcare and medical requirements”. The office said hundreds of them “have lost their sons, newborns, or unborn children due to bombing, fear, and ‘Israeli’ killing.”

The statement also referred to the plight of female Palestinian detainees, saying dozens are “facing physical and psychological torture, poor treatment, and humiliation.”

The media office hailed the “steadfastness” of Palestinian women, stressing that they are “in dire need to defend their rights and life requirements rather than being killed, shot at, detained, and forced into displacement and migration, as the occupation army has been doing for over five continuous months.”

The office also held the US, the international community, and all relevant international organizations “fully responsible” for the genocide in Gaza and the harsh conditions forced upon Palestinian women there, slamming those who take part in the war and those who remain silent on the Israeli crimes.

The statement also urged “all the countries of the free world and the international community” to work towards ending the ‘Israeli’ occupation, and to take action to save Palestinian women from the ongoing Israeli crimes, “including killing, shooting, arresting, humiliating, torturing, and forcing them to leave their homes, cities, and residential areas.”

Israel launched the war on Gaza on October 7 after the Palestinian resistance movement Hamas waged the surprise Operation Al-Aqsa Storm against the occupying entity in response to the Israeli regime's decades-long campaign of bloodletting and devastation against Palestinians.

The Tel Aviv regime has also imposed a “complete siege” on the territory, cutting off fuel, electricity, food and water to the more than two million Palestinians living there.

Since the start of the offensive, the Tel Aviv regime has killed more than 30,000 Palestinians and injured over 72,000 others.

Thousands more are also missing and presumed dead under the rubble in Gaza.

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