Saudi Arabia’s finance ministry set new income taxes for oil companies yesterday in a well-flagged move towards promised fiscal reform and to help pave the way for a possible sale of a small part of its national oil company, Saudi Aramco.
The government announced in a statement via the official news agency that the income tax rate for companies with a capital value above 375 billion Saudi riyals (Dh367.24bn) would be cut to 50 per cent from 85 per cent.
Aramco, which is above the 375bn riyals capital threshold, currently pays a 20 per cent royalty on its production – which averaged about 10.5 million barrels per day last year – and an 85 per cent rate on its income.
Its chief executive, Amin Nasser, welcomed the new tax regime and said it would mean the company’s tax rates are at internationally competitive rates.
The government has been urged by the IMF, among others, to reform its fiscal system to bring it into line with international practice and to attract private sector investors not only to Aramco and the hydrocarbon sector but to a wide range of privatisation projects the kingdom has set out as part of the government’s Vision 2030 reform programme.
But yesterday’s move is clearly primarily aimed at preparing Aramco for a potential initial public offering of shares.
“To get a higher value for the Aramco IPO they need a lower government take,” said Robin Mills, the chief executive of Qamar Energy, a Dubai-based energy consultancy.
The government is highly dependent on the revenue it gets from Aramco, so the income lost by reducing the tax rate would be mostly made up by taking dividends, which would be paid to private investors also.
“But we’ll need to see details of the dividend policy,” noted Jason Tuvey, the Middle East econonmost at Capital Economics. “All they’ve given us here are four figures, so the dividend policy will be the next big thing,” he added.
“And we still need to see Aramco’s finances which, presumably, we’ll learn from the IPO prospectus, which still may be a year or more away.”
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Fuel for Thought: Saudi Arabia's communication problem
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The government announced tax rates on a sliding scale: tax will be 65 per cent for companies whose capital is between 300bn and 375bn riyals; 75 per cent for 225bn to 300bn riyals; and 85 per cent for companies below 225bn riyals. There was no further explanation of these tax rates.
“It’s odd because Aramco is the monopoly producer,” said Mr Mills, who is also a columnist for The National. If it is aimed at setting rates for some future smaller producers in the kingdom “that would be huge but also weird as it raises taxes the smaller a company gets, which is the reverse of what’s normally done”, he added.
Reform of the energy sector is the centrepiece of Saudi Arabia’s efforts to breath some entrepreneurial life into its economy and prepare it for a post-oil world.
Other fiscal changes the government has announced include a gradual liberalisation of the domestic energy market, including loss-making domestic Aramco oil product sales. Reducing subsidies generated additional revenue for Aramco last year of 28bn riyals, the IMF estimates.
The IPO was first announced last year by deputy crown prince Mohammed bin Salman, who has been the main public voice backing Saudi reform.
While the deputy crown prince said an Aramco IPO would value the company at US$2 trillion based on its vast oil reserves, analysts have started to publicly cast doubt on that estimation.
The valuation of the shares would be based on the expected cash flow of the company, which depends primarily on its export rates over a few years as well as its costs, and government policy on production, tax, investment, subsidies and host of other key planks.
There is now some clarity on the tax rate but, as Mr Tuvey points out, the most important factor for Saudi Arabia and Aramco is the global oil market and what that means for its output rate – which has been sharply cut by the deal the kingdom engineered last November – and international oil prices, over which it has much less control than it used to have.
amcauley@thenational.ae
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How to watch Ireland v Pakistan in UAE
When: The one-off Test starts on Friday, May 11
What time: Each day’s play is scheduled to start at 2pm UAE time.
TV: The match will be broadcast on OSN Sports Cricket HD. Subscribers to the channel can also stream the action live on OSN Play.
Killing of Qassem Suleimani
EA Sports FC 25
Developer: EA Vancouver, EA Romania
Publisher: EA Sports
Consoles: Nintendo Switch, PlayStation 4&5, Xbox One and Xbox Series X/S
Rating: 3.5/5
The biog
Age: 35
Inspiration: Wife and kids
Favourite book: Changes all the time but my new favourite is Thinking, Fast and Slow by Daniel Kahneman
Best Travel Destination: Bora Bora , French Polynesia
Favourite run: Jabel Hafeet, I also enjoy running the 30km loop in Al Wathba cycling track
Results:
5pm: Baynunah Conditions (UAE bred) Dh80,000 1,400m.
Winner: Al Tiryaq, Dane O’Neill (jockey), Abdullah Al Hammadi (trainer).
5.30pm: Al Zahra Handicap (rated 0-45) Dh 80,000 1,400m:
Winner: Fahadd, Richard Mullen, Ahmed Al Mehairbi.
6pm: Al Ras Al Akhdar Maiden Dh80,000 1,600m.
Winner: Jaahiz, Jesus Rosales, Eric Lemartinel.
6.30pm: Al Reem Island Handicap Dh90,000 1,600m.
Winner: AF Al Jahed, Antonio Fresu, Ernst Oertel.
7pm: Al Khubairah Handicap (TB) 100,000 2,200m.
Winner: Empoli, Pat Dobbs, Doug Watson.
7.30pm: Wathba Stallions Cup Handicap Dh80,000 2,200m.
Winner: Shivan OA, Patrick Cosgrave, Helal Al Alawi.
Teri%20Baaton%20Mein%20Aisa%20Uljha%20Jiya
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COMPANY%20PROFILE
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Diriyah%20project%20at%20a%20glance
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GREATEST ROYAL RUMBLE CARD
The line-up as it stands for the Greatest Royal Rumble in Saudi Arabia on April 27
50-man Royal Rumble
Universal Championship
Brock Lesnar (champion) v Roman Reigns
Casket match
The Undertaker v Rusev
Intercontinental Championship
Seth Rollins (champion) v The Miz v Finn Balor v Samoa Joe
SmackDown Tag Team Championship
The Bludgeon Brothers v The Usos
Raw Tag Team Championship
Sheamus and Cesaro v Bray Wyatt and Matt Hardy
United States Championship
Jeff Hardy (champion) v Jinder Mahal
Singles match
Triple H v John Cena
To be confirmed
AJ Styles will defend his WWE World Heavyweight title and Cedric Alexander his Cruiserweight Championship, but matches have yet to be announced
Off-roading in the UAE: How to checklist
The Settlers
Director: Louis Theroux
Starring: Daniella Weiss, Ari Abramowitz
Rating: 5/5
UAE v Gibraltar
What: International friendly
When: 7pm kick off
Where: Rugby Park, Dubai Sports City
Admission: Free
Online: The match will be broadcast live on Dubai Exiles’ Facebook page
UAE squad: Lucas Waddington (Dubai Exiles), Gio Fourie (Exiles), Craig Nutt (Abu Dhabi Harlequins), Phil Brady (Harlequins), Daniel Perry (Dubai Hurricanes), Esekaia Dranibota (Harlequins), Matt Mills (Exiles), Jaen Botes (Exiles), Kristian Stinson (Exiles), Murray Reason (Abu Dhabi Saracens), Dave Knight (Hurricanes), Ross Samson (Jebel Ali Dragons), DuRandt Gerber (Exiles), Saki Naisau (Dragons), Andrew Powell (Hurricanes), Emosi Vacanau (Harlequins), Niko Volavola (Dragons), Matt Richards (Dragons), Luke Stevenson (Harlequins), Josh Ives (Dubai Sports City Eagles), Sean Stevens (Saracens), Thinus Steyn (Exiles)
Smart words at Make Smart Cool
Make Smart Cool is not your usual festival. Dubbed “edutainment” by organisers Najahi Events, Make Smart Cool aims to inspire its youthful target audience through a mix of interactive presentation by social media influencers and a concert finale featuring Example with DJ Wire. Here are some of the speakers sharing their inspiration and experiences on the night.
Prince Ea
With his social media videos accumulating more half a billion views, the American motivational speaker is hot on the college circuit in the US, with talks that focus on the many ways to generate passion and motivation when it comes to learning.
Khalid Al Ameri
The Emirati columnist and presenter is much loved by local youth, with writings and presentations about education, entrepreneurship and family balance. His lectures on career and personal development are sought after by the education and business sector.
Ben Ouattara
Born to an Ivorian father and German mother, the Dubai-based fitness instructor and motivational speaker is all about conquering fears and insecurities. His talk focuses on the need to gain emotional and physical fitness when facing life’s challenges. As well managing his film production company, Ouattara is one of the official ambassadors of Dubai Expo2020.
The specs
Engine: 3.0-litre six-cylinder turbo
Power: 398hp from 5,250rpm
Torque: 580Nm at 1,900-4,800rpm
Transmission: Eight-speed auto
Fuel economy, combined: 6.5L/100km
On sale: December
Price: From Dh330,000 (estimate)
Retail gloom
Online grocer Ocado revealed retail sales fell 5.7 per cen in its first quarter as customers switched back to pre-pandemic shopping patterns.
It was a tough comparison from a year earlier, when the UK was in lockdown, but on a two-year basis its retail division, a joint venture with Marks&Spencer, rose 31.7 per cent over the quarter.
The group added that a 15 per cent drop in customer basket size offset an 11.6. per cent rise in the number of customer transactions.
UAE v Ireland
1st ODI, UAE win by 6 wickets
2nd ODI, January 12
3rd ODI, January 14
4th ODI, January 16
UAE currency: the story behind the money in your pockets
MO
%3Cp%3E%3Cstrong%3ECreators%3A%20%3C%2Fstrong%3EMohammed%20Amer%2C%20Ramy%20Youssef%3C%2Fp%3E%0A%3Cp%3E%3Cstrong%3EStars%3A%20%3C%2Fstrong%3EMohammed%20Amer%2C%20Teresa%20Ruiz%2C%20Omar%20Elba%3C%2Fp%3E%0A%3Cp%3E%3Cstrong%3ERating%3A%3C%2Fstrong%3E%204%2F5%3C%2Fp%3E%0A
Premier League results
Saturday
Tottenham Hotspur 1 Arsenal 1
Bournemouth 0 Manchester City 1
Brighton & Hove Albion 1 Huddersfield Town 0
Burnley 1 Crystal Palace 3
Manchester United 3 Southampton 2
Wolverhampton Wanderers 2 Cardiff City 0
West Ham United 2 Newcastle United 0
Sunday
Watford 2 Leicester City 1
Fulham 1 Chelsea 2
Everton 0 Liverpool 0
UAE currency: the story behind the money in your pockets
Emergency phone numbers in the UAE
Estijaba – 8001717 – number to call to request coronavirus testing
Ministry of Health and Prevention – 80011111
Dubai Health Authority – 800342 – The number to book a free video or voice consultation with a doctor or connect to a local health centre
Emirates airline – 600555555
Etihad Airways – 600555666
Ambulance – 998
Knowledge and Human Development Authority – 8005432 ext. 4 for Covid-19 queries
A little about CVRL
Founded in 1985 by Sheikh Mohammed bin Rashid, Vice President and Ruler of Dubai, the Central Veterinary Research Laboratory (CVRL) is a government diagnostic centre that provides testing and research facilities to the UAE and neighbouring countries.
One of its main goals is to provide permanent treatment solutions for veterinary related diseases.
The taxidermy centre was established 12 years ago and is headed by Dr Ulrich Wernery.
