Abstract
The purpose of this study is to determine the economic and social effects of the adoption of value-added tax in the Kingdom of Saudi Arabia. To achieve this goal, a descriptive and an analytical approach was used. We examine a sample of (287) Saudi nationals working in the private and public sectors. Our methodology used the direct questionnaire delivery and receipt method. To process our data and test our research hypotheses, we used SPSS software. The results indicate that the implementation of the value-added tax increases the country’s financial resources. However, such an initiative has a negative social impact and faces many challenges. Bearing on these results, we recommend the need to upgrade the quality of the implementation of the on value-added tax law through improving the efficiency and effectiveness of employees in the General Authority of Zakat & Tax, and simplifying tax procedures until the positive effects on the economic and social side rebound. The researcher recommends the need to overcome economic challenges through the commitment of wholesalers and retailers to release tax invoices for all their dealings, and to organize their businesses through electronic invoices. The researcher recommends the need to overcome the social challenges that face the implementation of the value-added tax law, by promoting trust between the community and the General Authority of Zakat & Tax and activating the role of the Zakat and Tax Authority in spreading awareness and tax culture to the community.
Highlights
Since January 1, 2018, the Kingdom of Saudi Arabia has started implementing the 5% valueadded tax, which is the lowest approved rate in the world
The adoption of value-added tax is one of the mechanisms covered by the Kingdom's 2030 vision of reducing dependence on oil as a primary source and diversifying the sources of the economy to ensure financial balance, continuity of development, and sustainability of government services
Alavuotunki et al, (2019): This study aimed to determine the effect of Value Added Tax (VAT) on government revenues and inequality between people
Summary
Since January 1, 2018, the Kingdom of Saudi Arabia has started implementing the 5% valueadded tax, which is the lowest approved rate in the world. This measure is expected to have a positive impact on economic growth through an increase in GDP. According to the report of the International Monetary Fund (2019), economic reforms in the Kingdom have started to achieve positive results, and it is recommended to increase this percentage to match the ratios approved around the world. The adoption of value-added tax is one of the mechanisms covered by the Kingdom's 2030 vision of reducing dependence on oil as a primary source and diversifying the sources of the economy to ensure financial balance, continuity of development, and sustainability of government services. The General Authority of Zakat & Tax is responsible for managing and applying this tax in the Kingdom of Saudi Arabia
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