Saudi Finance Minister Mohammed Al-Jadaan said Tuesday that the Kingdom’s economy was currently in excellent shape, and the government would reconsider imposing a financial fee on dependents in light of its vision to attract new talent to the market.
Speaking on the “Socrates Podcast,” which Al-Arabiya English listened to, questions were raised about the impact of imposing a financial fee on dependents on private consumption within the Saudi economy. It highlighted the decision of some residents to send their families back to their home countries, thereby losing a consumer force of about 2 million people who spend their money outside the Saudi economy. This is in addition to transferring the maintenance money of the working residents outside the Kingdom.
Since 2020, expatriate workers in Saudi Arabia have been obliged to pay a fee of SR400 ($100.6) per dependent.
Al-Jadaan explained that the decision differs significantly for the government since the vision is different, especially as many services like electricity, water, gasoline, some healthcare services, security, roads, and road wear are subsidized.
“When more than two million people use such services for free, [and] the economic comparison determined, [it] is better to impose the financial fee due to the dependents benefiting from the subsidies provided,” he added.
Set initially at SR100 in 2017 and incrementally raised, this fee was justified through an economic analysis of the consumption habits of around 2 million people using state-subsidized services. Al-Jadaan said these individuals mainly consume imported goods, leading to capital outflow. “Yet, with recent subsidy reductions and more targeted support via the Citizen’s Account Program, the situation merits review,” the Saudi minister said.
Furthermore, Al-Jadaan said that 90 percent of spending and consumption within Saudi Arabia is imported. “So the bulk of it ultimately goes out.”
With the lifting of some subsidies and targeting those entitled to support, the benefits and impacts have become more clear and are being regularly reassessed. “If the returns from their presence become higher, we will review the decision, especially as the market is currently targeting attracting talents and ensuring their families’ stability as long as they are productive to the economy.”
He confirmed that imposing the financial fee on dependents is currently under review.
Al-Jadaan emphasized that adjustments to the dependent fee align with broader strategic goals to enhance Saudi Arabia’s appeal to high-skilled expatriates.
On the VAT, which was implemented to align with regional policies, Al-Jadaan mentioned its role in supporting low-income families through the Citizen’s Account Program. Despite the VAT rate increase to 15 percent and rising energy prices, adjustments to the program were made to mitigate the impact on citizens.
He said that there were no plans to lower the 15 percent VAT rate, explaining that financial policies adapt to economic conditions with measures to offset social impacts.
“When the decision to impose a value-added tax was made, it considered the reform cost on the lower-income brackets through the Citizen Account, and the tax cost on the food basket, electricity, and water was studied. Instead of subsidizing higher incomes, support amounts were allocated to lower-income brackets after unifying the tax for everyone through the Citizen Account. When gasoline prices rose, the Citizen Account was reviewed again,” he said.
Al-Jadaan admitted that no policy could be flawless. “And if the advantages outweigh the flaws, we try to minimize those flaws,” he said.
Highlighting efforts to diversify the economy and government income, Al-Jadaan noted significant strides in increasing non-oil revenues from SR79 billion to an estimated SR440 billion. The economy has seen growth in various sectors, each contributing substantially to the GDP, marking a new era of economic diversification in Saudi Arabia.
Source: Al Arabiya
