Saudi Arabia triples VAT, suspends handouts amidst corona crisis

News Network
May 11, 2020

May 11: Saudi Arabia will triple its value-added tax rate and suspend a cost of living allowance for state workers, it said on Monday, seeking to shield finances hit by low oil prices and a slump in demand for its lifeline export worsened by the new coronavirus.

Historic oil output cuts agreed by Riyadh and other major producers have given only limited support to prices after they sank on oversupply caused by a war for petroleum market share between the kingdom and its fellow oil titan Russia.

Saudi Arabia, the world's largest oil exporter, is also being hit hard by measures to fight the new coronavirus, which are likely to curb the pace and scale of economic reforms launched by Crown Prince Mohammed bin Salman.

"The cost of living allowance will be suspended as of June 1, and the value added tax will be increased to 15% from 5% as of July 1," Finance Minister Mohammed al-Jadaan said in a statement reported by the state news agency. "These measures are painful but necessary to maintain financial and economic stability over the medium to long term...and to overcome the unprecedented coronavirus crisis with the least damage possible."

The austerity measures come after the kingdom posted a $9 billion budget deficit in the first quarter.

The minister said non-oil revenues were affected by the suspension and decline in economic activity, while spending had risen due to unplanned strains on the healthcare sector and the initiatives taken to support the economy.

"All these challenges have cut state revenues, pressured public finances to a level that is hard to deal with going forward without affecting the overall economy in the medium to long term, which requires more spending cuts and measures to support non-oil revenues stability," he added.

The government has cancelled and put on hold some operating and capital expenditures for some government agencies, and cut allocations for some reform initiatives and projects worth a total 100 billion riyals ($26.6 billion), the statement said.

Central bank foreign reserves fell in March at their fastest rate in at least 20 years and to their lowest since 2011, while oil revenues in the first three months of the year fell 24% from a year earlier to $34 billion, pulling total revenues down 22%.

"The reforms are positive from a fiscal side as greater adjustment is essential. However, the tripling of VAT is unlikely to help that much in 2020 revenue wise with the expected fall in consumption," said Monica Malik, chief economist at Abu Dhabi Commercial Bank.

She said she kept unchanged her deficit forecast of 16.3% of GDP for this year, which already factors in a greater than previously announced spending cut.

About 1.5 million Saudis are employed in the government sector, according to official figures released in December.

In 2018, Saudi Arabia's King Salman ordered a monthly payment of 1,000 riyals ($267) to every state employee to compensate them for the rising living costs after the government hiked domestic gas prices and introduced value-added tax.

DIFFICULT TIMES

A committee has been formed to study all financial benefits paid to public sector employees and contractors, and will submit recommendations within 30 days, the statement said.

In late 2015, when oil prices fell from record highs, the kingdom slashed lavish bonuses, overtime payments and other benefits once considered routine perks in the public sector.

In a country without elections and with political legitimacy resting partly on distribution of oil revenue, the ability of citizens to adapt to such reforms is crucial for stability.

"Tripling the VAT will test the limits of the balance between revenues and consumption as the economy dives into a deep recession. The move will impact consumption and could also lower the expected revenues," said John Sfakianakis, a Gulf expert at the University of Cambridge.

"These are pro-austerity and pro-revenue moves rather than pro-growth ones," he said.

Hasnain Malik, head of equity strategy at Tellimer, said the VAT rise could bring about $24-$26.5 billion in additional non-oil fiscal revenue. The rise would hit consumer spending further but was a needed step towards fiscal sustainability, he said.

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News Network
October 21,2024

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Mangaluru: Forest officials successfully captured a leopard that strayed into the kitchen of a house in Akkasaligara Keri, Mulki, on the outskirts of Mangaluru, during the early hours of Sunday, October 20.

Following multiple complaints from residents about leopard sightings, forest department officials had placed cages at various locations in Mulki. According to Deputy RFO Manjunath Ganiga, locals had reported spotting a leopard in the area, prompting the department to set up a cage about a kilometer from the affected house.

At approximately 10 p.m., the leopard entered the house and made its way into the kitchen. The family quickly locked the kitchen door and contacted the forest department for assistance. The forest officials, using a cage and a net, managed to trap the leopard around 2:45 a.m. The animal was later examined by veterinarians and released back into the wild.

Locals suspect that up to three leopards may be roaming the area.

The operation to capture the leopard was led by RFO Kiran Kumar, with assistance from Deputy RFOs Nagesh Billava and Manjunath Ganiga, along with forest department staff members Chandrashekar and Shankar.

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News Network
October 18,2024

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Hamas leader Yahya Sinwar has been martyred in an Israeli airstrike in Gaza's Rafah city, a senior Hamas official confirmed.

Khalil Hayya, head of Hamas in Gaza, delivered a statement on Friday, a day after reports of Sinwar's martyrdom. 

"We mourn the great national leader, the Mujahid Martyr Brother Yahya Al-Sinwar (Abu Ibrahim), Head of the Political Bureau of the Islamic Resistance Movement (Hamas) and Commander of Al-Aqsa Storm Operation," he said.

He remembered Sinwar as "one of the noblest and bravest men, a man who dedicated his life to Palestine and gave his soul for the sake of Allah on the path to its liberation."

"He rose as a heroic martyr, advancing and never retreating, wielding his weapon, engaging and confronting the occupation army at the frontlines. He moved between all combat positions, steadfast and stationed on the honored land of Gaza, defending the land of Palestine and its holy sites, inspiring the spirit of endurance, patience, steadfastness, and resistance."

Referring to the history of Sinwar's struggle against the Israeli regime, Hayya noted that the fallen leader "attained the highest rank and the noblest medal, ascending as a witness and a martyr, content with the jihad and sacrifice he offered."

Naming a host of other resistance leaders assassinated by the Israeli regime in the past years, the Hamas official noted that "these sacrifices will continue to illuminate our path and drive us to more resilience and steadfastness."

"Hamas remains committed to the promise of its founding leaders and martyrs until the aspirations of our people are fully realized: the complete liberation and return, and the establishment of the Palestinian state on the entire national soil with Al-Quds as its capital, by Allah’s will," he said, adding, "This will become a curse upon the invading occupiers who are strangers to this land."

He underlined that the martyrdom of leaders "only strengthens Hamas and our resistance, making us more determined and steadfast in following their path, honoring their blood and sacrifices."

He highlighted that Israeli captives held in Gaza "will not return except with the cessation of aggression on Gaza, its withdrawal, and the release of our heroic prisoners from the occupation’s jails."

The charismatic leader of the Palestinian resistance movement had escaped many assassination attempts before and after Operation Al-Aqsa Flood on Oct. 7, 2023.

Sinwar, 62, played an instrumental role in coordinating and supervising the landmark operation that jolted the Zionist regime. 

Before becoming the Hamas leader in Gaza in 2017, Sinwar spent 22 years in an Israeli prison. He was released as part of a prisoner swap in 2011.

“Hamas will never abandon the path of resistance… Our resistance will continue until the liberation of all of Palestine,” he declared during a speech in Gaza in late October 2017.

Sinwar had been chosen as the overall Hamas leader after Israel assassinated Ismail Haniyeh in July.

Haniyeh was assassinated in Tehran, where he was to attend the inauguration ceremony of new Iranian President Masoud Pezeshkian.

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News Network
October 31,2024

Bengaluru: Karnataka Chief Minister Siddaramaiah on Thursday alleged that BJP was raking up the "Waqf issue" with an eye on the upcoming assembly by-polls in the state and elections in neighboring Maharashtra.

Following allegations by a section of farmers in certain parts of the state that their lands were marked as Waqf properties, he reiterated that none of them will be evicted, and notices issued to them will be withdrawn.

"BJP is doing politics. Notices were issued during their (BJP) tenure too, what do they have to say about it? During BJP's tenure over 200 notices were given. One should not practice such dual politics," Siddaramaiah said.

Speaking to reporters here, the CM said, "I have already said that the notices will be withdrawn, where is the issue? In case the notices are issued they will be withdrawn and no one will be evicted, where is the issue?" "Whichever district it is...They (BJP) had also given notices in several districts. Why did they give? Why are they doing such politics? In case notices were served by our government, they will be withdrawn and no farmers will not be evicted....the protest they have planned on November 4 is for politics keeping in mind by-polls in three segments and Maharashtra elections," he added.

A section of farmers from Vijayapura district have alleged that their lands were marked as Waqf properties, and similar allegations have surfaced from a few other places.

The BJP is planning a statewide agitation on November 4, demanding the resignation of Minority Welfare and Waqf Minister B Z Zameer Ahamed Khan, and against the Congress government over the issue.

Accusing the BJP of only doing politics and and not speaking the truth, Siddaramaiah said, "they only speak lies, they make issue out of non issue. Is there any issue in MUDA (site allotment case, in which he is accused and facing probe)? They wanted to make a non issue, an issue." Channapatna, Shiggaon and Sandur Assembly segments will go for by-polls on November 13.

The CM said he will go for campaigning in three assembly segments that will go for bypolls, from November 4 to 11.

He expressed confidence about Congress winning all the three segments.

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