MANAMA, BAHRAIN, JAN. 4 -- Saudi Arabia announced today that it is reimposing taxes, after more than 12 years without them, on the earnings of foreign companies and foreign workers.
Despite assurances by King Fahd that the measure may be temporary, the business community in the Persian Gulf nations saw it as an official eulogy for oil boom years. The taxes had been suspended in 1975.
The measure was widely expected to add to a regional recession already evidenced by the "for rent" signs on vacant buildings and an exodus of foreign workers who have seen their salaries steadily slashed amid declining oil revenues.
Most foreign businessmen, including those who have become accustomed to nonpayment by clients and chronic problems with local partners and the bureaucracy in Saudi Arabia, called the measure highly discriminatory and counter to Riyadh's professed desire to promote joint ventures. Saudi nationals and companies are exempt from the tax as are Saudi participants in joint ventures. But the foreign partners in joint ventures will be taxed.
The corporate tax ranges from 25 percent on profits of up to $26,666 per year, to 45 percent on profits of more than $266,666 per year.
Taxes on salaries range from 5 percent on annual income between $1,600 and $4,266 to 30 percent on income of more than $17,600.
The reimposed taxes come as part of a 1988 budget of $35.9 billion entailing a deficit of at least $9.57 billion.
Saudi Arabia had announced Saturday that all duty-free items, with the exception of a few foodstuffs, will be subject to an import duty of up to 20 percent. Saudi oil revenues for 1988 are projected to drop by 5.7 percent to $18.4 billion. By comparison, oil earnings peaked in 1981 at more than $100 billion.