The past couple of years have been historic for Saudi Arabia, a country once perceived as ultra-conservative and too prudent to allow just anyone in. But dips in oil revenues and financial difficulties across the globe have taken a toll on the wary kingdom known for its petrol-reliant economy.
In a bid to fill gaps, the country has been working on diversifying its economy under an ambitious blueprint known as Vision 2030, presented by Crown Prince Mohammed bin Salman in 2016. A section in this rehabilitation plan involves the unrolling of several taxes, which the kingdom was free of up until MBS' plan was set.
Several taxes have been imposed on residents of the country in recent years, with the latest currently being an excise on domestic flights. Dubbed the "Airport Building Tax," the levy was announced by the General Authority of Civil Aviation (GACA) over the weekend and is set to be imposed in January.
Revenues generated from the tax will go towards funding "airport infrastructure development projects and enhancing airport services."
The extra charge to be paid amounts to 21 Saudi riyals ($5.60) for a one-way ticket — divided into 10 Saudi riyals for departure airport, 10 Saudi riyals for arrival airport, and 1 Saudi riyal value-added tax. As for round trips, charges will double.
People who book domestic air carriers at local international departure terminals will be expected to pay a total of 87 Saudi riyals ($23), according to Arab News.
Who's exempted from the soon-to-be implemented tax?
Those exempt from the excise include:
- Passengers staying on board during transits and thus not using airport facilities
- Members of crew on duty
- Members of aircraft registered on the list of airline pilots who have IDs
As to whether the charge is set to increase over time as with other similar taxes in Saudi Arabia, a kingdom once known as a tax-free haven, the amount will be "subject to decrease or increase every three years."
Saudi Arabia is no longer tax-free
Imposing taxes is set to contribute billions to the kingdom's economy over the next few years.
In June 2017, Saudi Arabia became the first Gulf Cooperation Council (GCC) country to impose a 100-percent "sin tax" on tobacco products and energy drinks, in addition to a 50-percent excise on soft drinks. An expansion of the "sin tax" stretched out to cover e-cigarettes and sweetened drinks back in May, while October witnessed a levy on restaurants and cafes serving tobacco.
Two years ago, the country launched its first-ever expat tax, affecting expatriates and their dependents. The monthly $26 fee - an amount expected to increase gradually every year until 2020 - is paid when a residence visa is sent for renewal or when a new visa is being issued.
In 2018, the kingdom's Shura Council approved the addition of VAT in supermarkets and stores, which has since gone into effect, and another bill that forces private companies to pay a fee for every foreign worker employed.