Saudi shoppers splurge before VAT rise

After weeks of lockdown, consumers in the kingdom are spending their savings on high-ticket items before prices increase

A Saudi woman pushes her shopping cart outside a supermarket a day before the expected increase of VAT from 5% to 15%, in Jiddah, Saudi Arabia. At background a banner showing Saudi King Salman, right, and his Crown Prince Mohammed bin Salman with Arabic reads, "We pledge you to love and loyalty". AP Photo

A Saudi vendor is seen through a bracelet as a woman buys jewels at the gold market a day before the expected increase of VAT from 5% to 15%, in Jiddah, Saudi Arabia. AP Photo

Saudis buy jewels at the gold market a day before the expected increase of VAT from 5% to15%, in Jiddah, Saudi Arabia. AP Photo

Saudis buy jewels at the gold market a day before the expected increase of VAT from 5% to 15%, in Jiddah, Saudi Arabia. AP Photo

Saudis shop at a jewellery shop in the Tiba gold market in the capital Riyadh, after authorities announced a 10% increase in the VAT rate, to reach 15%, starting from July 1. AFP

Saudis shop at a jewellery shop in the Tiba gold market in the capital Riyadh. AFP

Saudis shop at a jewellery shop in the Tiba gold market in the capital Riyadh. AFP

Shoppers walk past jewellery shops in the Tiba gold market in the capital Riyadh. AFP

Saudis shop at a jewellery shop in the Tiba gold market in the capital Riyadh. AFP

Saudis shop at a jewellery shop in the Tiba gold market in the capital Riyadh. AFP

Saudis shop at a jewellery shop in the Tiba gold market in the capital Riyadh. AFP

Saudis shop at a jewellery shop in the Tiba gold market in the capital Riyadh. AFP

Shoppers in Saudi Arabia are rushing to reopened stores and malls to make last-minute purchases before a rise in VAT.

From July 1, VAT in the kingdom will triple from 5 to 15 per cent as the government raises funds to support the economy and cushion the blow to public finances from the pandemic.

Friday and Saturday in Jeddah saw crowds hit the city’s major shopping centres like Red Sea Mall, Arab Mall and Andalus Mall. Many went for luxury goods, including watches, jewellery and expensive cosmetics at department stores. On forecourts, others rushed to buy new cars.

Retailers have only recently opened after the government eased measures to curb the spread of the coronavirus pandemic that closed venues, shopping centres and malls in recent months.

Aziz Abu Shaker, who manages an electronic store, said he saw a huge leap in business on the final weekend before the tax hike.

"For sure, many people were buying digital products. The last-minute rush pushed up sales that have been on the rise over the past few weeks amid the gradual economic recovery," Abu Shaker told The National.  "I believe both lifting the curfew as well as the increase of VAT to 15 per cent played a role in making customers shopping this weekend."

He said expensive appliances like mobiles, digital accessories, refrigerators, washers and air conditioners were most popular.

Shoppers told The National that they were buying big-ticket items now to avoid the increased tax.

“I am sure prices of goods will hike within two days, therefore I am planning to get a new mobile,” Saud Al Harbi, 28, said as he hunted Roshan Mall for a new iPhone.

Abdulgader Al Zahrani said he has purchased a number of expensive items since coronavirus restrictions were lifted ahead of the hiked tax.

“We have to benefit from this time to buy items that we really need before the new 15 per cent VAT which will start on July 1.”

He said that even though it was expensive, the family had saved some money being stuck at home over the last few months and it was better to buy it before the price rises.

“I bought a new refrigerator, clothes and new appliances for our house,” he said. “During the coronavirus curfew, we saved some money and after the government announced the introduction of the new VAT, I think it is a wise decision to buy now before the due date.”

Meanwhile, Maha Assiri, 30, who works for a private company said she has a special connection to gold. “This is the best time to buy my favourite jewellery and I have to do it now before prices go up,” she said. “Maybe we’ve had to cancel the family holiday this year, but I feel you can take advantage of this time to buy something we need while getting some great deals before the introduction of 15 per cent VAT.”

Maher Abdul Wahab, 38, a private sector employee, said he was very disappointed he could not buy a new car before July 1.

“I went to a car dealer last month, which is a good time ahead of the new VAT, but I was shocked when the salesman told me they have stopped selling cars temporarily. Other showrooms have raised their prices about 35 per cent,” he said.