Impose taxes to manage public consumption

Impose taxes to manage public consumption

2012
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Ahmed Al-Jomai

By Ahmed Al-Jomai

VALUE-added tax (VAT) and selective sales tax (ST) aim to increase government revenue and improve consumer behavior. Both of these taxes are related to laws that will be applied in all Gulf countries. They will help diversify income, enhance non-oil revenue and eventually lead to tangible gains and advantages on the ground, just like developed countries that impose taxes as a main source of income.

There is a difference between VAT and ST. The former is indirect and is imposed on all commodities and services except the exempted ones, specifically those commodities that citizens rely on in their daily lives. VAT will be imposed based on the price difference of selling and buying and will not exceed five percent and will be paid by consumers. ST will be imposed on harmful commodities such as tobacco, energy drinks and soft drinks, and will range between 50 to 100 percent.

Gulf countries, including the Kingdom, of course, will pass legislation and laws and will coordinate with one another before imposing taxes. ST will be imposed first because it is important for public health. The general public in Gulf countries needs to be prepared to accept the idea of VAT and live with it.

Both types of taxes help manage public consumption and reduce the amount that people spend. They also, most importantly, raise public awareness about spending and saving. Consumers need to understand that they should only spend money on the things they need, not on the things they want or desire. They have to be aware of their income and spending patterns and know how to plan their monthly expenses.

The General Commission for Zakat and Income Tax is responsible for collecting VAT and ST, ensuring that all taxpayers comply with relevant laws and that no one evades taxes. The department applies international standards for tax collection and uses state-of-the-art technology to ensure precision and accuracy.

Taxes are an important resource for our economy and will bring about positive results in the long run. It is high time we imposed taxes.

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