4.6 Article

Does the Vision 2030 and Value Added Tax Leads to Sustainable Economic Growth: The Case of Saudi Arabia?

Journal

SUSTAINABILITY
Volume 13, Issue 19, Pages -

Publisher

MDPI
DOI: 10.3390/su131911090

Keywords

Saudi Arabia; Vision 2030; value-added tax; sustainable economic growth; vector error correction

Funding

  1. University of Jeddah, Jeddah, Saudi Arabia [UJ-21-DR-87]

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This research aims to examine the effects of the introduction of VAT and Vision 2030 on the economy of Saudi Arabia. The results show that labor has a negative impact after the introduction of VAT, while capital and financial development become more significant. Oil prices have significant negative coefficients, and trade openness shows a significant positive coefficient after Vision 2030.
The motivation behind the current research is to check the effect of the recent introduction of value added tax (VAT) and Vision 2030 on the economy of Saudi Arabia. To check this, those variables are added to the analysis which contribute to economic development including labor, capital, oil price, financial development, and trade openness to examine that how economic transformation affects the role of these variables in economic growth. According to the vector error correction (VEC) model, the impact of labor becomes negative after VAT, however, the impact of capital and financial development becomes significant by this transformation. The coefficients of oil prices, for positive and negative shocks, are significant and negative. Financial development and trade openness are reporting surprising results; positive shocks have shown negative coefficients. However, after Vision 2030, trade openness has a significant and positive coefficient. Policy implications include diversification of exports, reviving the private financing mechanism and restructuring the export/import policies.

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