Saudi Arabia is tripling its value-added tax rate in a plan to save $27 billion amid plummeting oil prices and the coronavirus

• Saudi Arabia is tripling its value-added tax (VAT) rate as part of its plan to save $27 billion amid a series of economic crises.
• VAT will be raised from 5% to 15% from July, finance minister Mohammad al-Jadaan announced Monday. The tax was only introduced in 2018.
• As part of the savings plan, the kingdom is also scrapping its 1,000-riyal ($267) monthly cost-of-living allowance for government employees from June.
• The triple-blow of declining oil prices, a stagnating domestic economy, and increased coronavirus healthcare expense are prompting the state to cut its budget.
• Visit Business Insider's homepage for more stories.

Saudi Arabia is tripling its value-added tax (VAT) rate as the coronavirus and plunging oil prices start to hammer the economy.

The kingdom will increase the VAT rate from 5% to 15% from July, finance minister Mohammad al-Jadaan announced Monday, according to the Saudi Press Agency (SPA).

This was announced as part of the government's plan to save 100 billion riyals — or $27 billion — amid declining oil prices, a stagnating domestic economy, and "unplanned expenses" for the healthcare system during the coronavirus pandemic, the SPA reported.

VAT is a type of tax that is levied on a good or service at each stage of production and final consumption.

Most of the world's countries have VAT, and Saudi Arabia introduced its own on January 1, 2018, as a way to source new income other than oil revenues. The US does not have a VAT; it uses a sales-tax system instead.

The savings plan will also scrap the 1,000-riyal ($267) monthly cost-of-living allowance for government employees from June. This scheme was launched in 2018.

The Saudi government is the country's largest employer, and the "state's wage bill accounts for about half the budget," according to the Financial Times.

"Further reduction in expenditures is needed, as well as undertaking measures that support the stabilization of non-oil revenues," the SPA said.

"These measures ... are necessary and beneficial to maintain comprehensive financial and economic stability on the medium and long-term for the interest of the country and its citizens."

The price of oil has plummeted in recent weeks, largely due to the lack of demand during the coronavirus outbreak, with West Texas Intermediate crude-oil futures plunging into negative territory last month. Prices have since recovered slightly.

The kingdom last week raised its oil prices for June, and OPEC and its allies are also preparing for production cuts to combat the fallen prices. Saudi Arabia is OPEC's most influential member.