Riyadh – Mubasher: Several top Saudi banks have reached settlements with the General Authority for Zakat and Tax (GAZT) worth a combined value of SAR 16.7 billion ($4.5 billion), according to Bloomberg, who said that banks have been trying to avoid a religious tax for sometime.
The deals come as Saudi Arabia, the world’s largest crude exporter, projects a budget deficit of SAR 131 billion ($34.91 billion), or 4.2% of gross domestic product (GDP) for 2019.
GAZT imposes a 2.5% zakat, or religious tax, but had begun including items that were previously exempt and excluding several deductions.
Al Rajhi Bank registered the highest zakat payment after agreeing to pay SAR 5.41 billion to GAZT, according to a statement to the Saudi Stock Exchange (Tadawul) on Thursday.
Meanwhile, Alinma Bank said it did not pay any settlement, noting that there would be a credit balance with the authority
“The back taxes are being paid amid changes to the country’s banking landscape, which saw Saudi British Bank and Alawwal Bank strike a deal in May to combine in a $5 billion stock deal. That was followed a month later with JPMorgan Chase & Co agreeing to sell its 7.5% stake in Saudi Investment Bank back to the Riyadh-based lender,” according to Bloomberg.
Moreover, the merger between HSBC affiliate Saudi British Bank and Alawwal Bank, which was backed by Royal Bank of Scotland Group and due to be completed in the first half of 2019, has been the starting point for similar deals across the kingdom’s banking and financial services sector.
Saudi Arabia’s budget deficit has worsened after the government increased spending and extended billions of dollars in government employee benefits.
The kingdom expects to generate SAR 975 billion in revenues in 2019, versus SAR 895 billion in 2018, it said last week, forecasting that taxes would contribute to the budget by around SAR 183 billion in 2019 against SAR 166 billion this year.
