Saudi shoppers rush to buy gold before taxes triple

JIDDAH, Saudi Arabia (AP) — Saudi shoppers have rushed to buy big-ticket items such as gold, appliances and electronics ahead of the announced tripling of taxes on basic goods on Wednesday as the government tries to shore up revenue for its economy battered by the coronavirus and low oil prices.

The government is tripling the Value Added Tax, or VAT, on basic goods and services from 5% to 15%, starting on Wednesday. It comes as the Saudi economy is now forecast to contract by 6.8% this year, according to the latest projections by the International Monetary Fund.

To beat the surge in taxes, Saudis have filled malls, supermarkets and some car dealerships in recent days as stores opened up again following weeks of lockdowns and restrictions due to the virus.

The kingdom eased restrictions on gyms, restaurants, businesses and gatherings in past weeks — even as the death toll from the virus continues to climb. On Tuesday, the kingdom said 50 died of COVID-19, the illness caused by the new coronavirus, to reach a total of 1,649 deaths among more than 190,000 confirmed cases so far.

Still, consumer spending in May amid a partial easing of restrictions was down nearly 16% compared to the previous year, according to Jadwa Investment. The Saudi economy contracted by 1% in the first quarter of 2020.

The virus has also stripped the kingdom this year of billions of dollars in revenue from the hajj pilgrimage, which normally draws 2.5 million people for five intense days of worship in Mecca.

Saudi authorities have said the hajj, which starts at the end of July this year, will be “very limited” and could include as few as 1,000 pilgrims from among existing residents of the kingdom due to concerns over the spread of the virus in large crowds.