VAT hike likely to hit Saudi retail sector in short term: analyst

The value-added tax (VAT) hike will have a negative impact on the Saudi retail sector in the first six months of VAT implementation, Abdullah Al-Rebdi, analyst at Riyadh-based Money Experts Institute for Training, told Argaam.

Consumers are expected to shun purchasing.

Luxury and expensive commodities, as well as top brands, will be largely impacted by the tripled VAT, while cheaper commodities, like foodstuffs will see an impact of up to 10% on total revenue.

Higher VAT might negatively impact Fawaz Abdulaziz Alhokair & Co.’s revenues and sales, as it owns luxury brands, especially in case flights are resumed between Saudi Arabia and the Gulf states, which so far have not applied the same VAT rate.

The market may adapt to VAT by mid-2021 or the end of next year, as was the case when the 5% VAT was levied for the first time.

Moreover, some merchants that have strong profit margins might partly absorb VAT. Accordingly, they might make a balance in prices and help them return to pre-tax levels.