Academy of Accounting and Financial Studies Journal (Print ISSN: 1096-3685; Online ISSN: 1528-2635)


Empirically Investigating of Valued Added Tax (VAT) and its Impact on Economic and Societal Well-Beings (Pre-and Post COVID19): A study based on kingdom of Saudi Arabia

Author(s): Mohammed Arshad Khan

The government of the Kingdom of Saudi Arabia (KSA) has concluded that the country cannot achieve sustainable economic growth if it continues to rely on its oil reserves alone as a source of revenue. As a result of pressure from the IMF, Saudi Arabia implemented its first Value-Added Tax (VAT) this year. There have been some complaints about the introduction of VAT in the Kingdom, especially from the younger population who have never known a tax-free existence. The global economic impact of the COVID19 health epidemic has been substantial. As of July 1, 2020, the VAT in the Kingdom of Saudi Arabia (KSA) will increase from 5% to 15%, which may indicate a new pattern of consumption behavior. Consequently, the purpose of this research is to investigate how Saudi youth feel about VAT based on five broad categories: Income inequality (II), system knowledge (SK), and international practice (GP) are all components of a successful tax system. The results, based on a survey of 460 people, show that nearly nine in ten people are aware of the introduction of VAT. But the analysis's unfavourable findings reveal that VAT is not a good tax system to apply (average TSE = 45.6% less favourable) since it does not address income inequality (average II= 45.3% less favourable). In addition, the findings indicate that the younger generation in Saudi Arabia continues to shop even after the introduction of VAT, demonstrating that the tax has no effect on their spending habits. This study is among the first to attempt to document such an impact and to analyze it in light of recent legislative amendments brought about by COVID-19 because of the dearth of research on VAT among GCC academics. Therefore, in light of COVID-19, this study is both contemporary and pertinent in that it can shed new light on the VAT system, its adoption, and its impacts on consumer behavior.

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