Saudi Arabia will triple its value added tax (VAT) from 5% to 15% as part of measures to shore up its economy hit by the impact of Covid-19 and low oil prices.
The government also said it will suspend the cost of living allowance as part of the austerity steps.
“The cost of living allowance will be suspended as of June first, and the value added tax will be increased to 15% from 5% as of July first,” the Saudi Press Agency said, citing a statement of the Ministry of Finance.
"These measures are painful but necessary to maintain financial and economic stability over [the] medium to long term... and overcome the unprecedented coronavirus crisis with the least damage possible," Finance Minister Mohammed al-Jadaan said in the statement.
Al-Jadaan warned last week that Saudi Arabia would have to take "strict and painful measures" to deal with the twin impact of coronavirus pandemic and falling world oil prices, an Arab News report said.
“We must reduce budget expenditures sharply,” Al-Jadaan said, adding that some government projects may be slowed down to reduce expenditure.
The kingdom first introduced VAT two years ago as part of efforts to cut its reliance on world crude oil markets.
The announcement came after state spending outstripped income, pushing the kingdom into a $9bn (£7.2bn) budget deficit in the first three months of the year.
That's as oil revenues in the period fell by almost a quarter from a year earlier to $34bn, pulling down total revenues by 22%.
At the same time Saudi Arabia's central bank saw its foreign reserves fall in March at their fastest rate in at least two decades and to their lowest level since 2011.