The introduction of a new five percent VAT on most goods and services was implemented on January 1.

Speculators consider it a drastic move as the two allied countries have enjoyed tax-free living for residents and most businesses for decades.

Some sectors have avoided VAT such as health, education and public transport. Also the UAE has not imposed VAT on international aviation despite it being home to two of the world’s largest airlines.

However, Riyadh has increased petrol prices by reducing subsidies as it wishes to cut consumption and ease pressure on public finances. This resulted in the price of lower-grade petrol rising by 83 percent, whilst higher-octane fuel rose by 127 percent.

Outrage from the public has hit the countries as this follows the implementation of large excise taxes on tobacco and sugary drinks last year.

One national posted on Twitter: “We don’t allow anyone to question our love for our nation and rulers, but the recent decisions have weighed on citizens and we are appealing to the rulers to reconsider raising energy prices.”

Already some accusations have come forward with companies are charging a higher amount that the VAT increase brings to most products.

This has lead to 247 violations being reported in more than 6,000 businesses which have been inspected over the last two days.

The introduction of VAT is part of Crown Prince Mohammed bin Salman’s economic reform programme as his aim is to wean the kingdom off its dependancy on oil.

Back in November, the Crown Prince lead the country’s newly established anti-corruption commission and arrested 11 Saudi Arabian princes along with dozens of senior officials and prominent businessmen.

The International Monetary Fund on the other hand is more than happy regarding the decision, as they believe it is a good way to raise non-oil revenue.

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