Business & Money | Tuesday 24 November, 2015 4:06 am |

The Cabinet approved on Monday the Shoura Council's decision to impose an annual 2.5 percent fee on undeveloped urban land designated for residential or commercial use, a major step in addressing a shortage of housing and developing the tax system.

 

The decision was taken at a Cabinet meeting, chaired by Custodian of the Two Holy Mosques King Salman at Al-Yamamah Palace in Riyadh on Monday. The Housing Ministry would now have to oversee bylaws to determine the price and amount of unused land.
A great deal of land in the country’s urban areas is reportedly owned by wealthy individuals or companies that have tended to hold or trade it for speculative profits. In 2013, the ministry estimated empty plots made up around 40 percent of Riyadh, local media reported.

The Cabinet decided that the tax would be introduced gradually to ensure fairness and prevent people and companies from evading payment. The fees, and fines of tax evaders, would be paid into an account opened at the Saudi Arabian Monetary Agency, the country’s central bank.
The executive bylaws will be approved by the Cabinet 180 days after its publication in the government gazette. According to reports, it is still unclear how much money would be raised for government coffers, but it could run into billions of riyals.

“This will have a positive impact in encouraging more development. It is positive for the real estate industry and thus for the construction sector,” said Rani Majzoub, head of real estate at consultants KPMG in Riyadh, according to Reuters. Land prices in Saudi cities may not necessarily drop, he said.
Meanwhile, the Cabinet also announced that it was ready to cooperate with all oil producing and exporting countries to achieve market stability. The Council of Ministers stressed the Kingdom’s role in achieving stability of the oil market and its continuous readiness and efforts to cooperate with all OPEC and non-OPEC countries to maintain the stability of the market and prices.