Saudi Press Agency

Emerging Voices

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Taxes, Austerity, Democracy, Oh My!

For centuries, taxation has played a crucial role in funding government services. But, in Saudi Arabia, the populace has enjoyed general freedom from governmental taxation, as the state has made much of its revenue from oil. However, with the coronavirus pandemic and the consumption and demand for oil slowing, the Saudi economy has begun to tank as many other economies follow suit.

However, one tiny “problem” can arise from the taxation of the country: democracy. Taxation of a population by the government leads to the belief that as citizens put money into their government, the government should be doing the same for their people. This is known as a social contract, championed by Jean-Jacques Rousseau. The theory states that when the government rules over a people, they unconsciously enter into a binding contract with one another to ensure the proper functioning of a state.

In Saudi Arabia, the population engages in a one-way contract, in which money flows directly from the state into the possession of the people. Austerity measures that have been introduced by Crown Prince Mohammed bin Salman have increased taxes on the general population, via a 15% value-added tax on goods and services. These measures also cut government employees’ monthly living expenses stipend. Although this increase in taxation does not directly lead to democracy, many scholars argue that people will start to demand some sort of political participation. The government has responded with an increase in stipends to the poor and increased social freedoms such as going to see movies and women being allowed to drive.

This move looks to be calculated, but ultimately is a desperate attempt to please a citizenry that has to give up their tax-free lives. The increase in social freedoms seems to be a move towards democracy, but a state that relies on a monarchy has a much farther way to go before achieving a legitimate democracy. The entirety of the country’s society is based on court culture and that of a ruling family. A change from an authoritarian regime to a democratic regime could take years or even decades.

In the present world where the Black Lives Matter movement has sparked international implications, a protest against these measures could be inevitable. However, the aforementioned response has seemingly kept the Saudi population quiet, but for how long? Due to the pandemic, this change may happen more slowly. Democratization seems to slow down as the global community becomes more globalized. The Saudi kingdom, one built on oil wealth, is an economic giant within the Gulf World. However, the bigger they are, the harder they fall. As Mohammed bin Salman grows in power, so does the restlessness of the population.

The oil wealth of the kingdom has been a concern of the government recently because of the falling prices of the “black gold.” Much of this is due to the virus, but it can also be traced to many oil-dependent countries, such as the United States, moving to become energy independent from the Arabian Gulf state. In early 2020, during a brief dispute between Saudi Arabia and Russia over cuts in oil production, President Trump had expressed great interest for a deal between the two countries, and OPEC, to reduce the number of barrels exported each day by 10 million. The proposed plan was a pipe dream as the two states have had a tumultuous relationship since they began to interact with one another.

The proposed reduction in oil exports, especially with the current circumstances, would deal a heavy blow to the Saudi economy. Although Mohammed bin Salman has been exploring ways to diversify the state economy, this loss in oil revenue would put the kingdom’s competency into question. Even with a diversified economy, states across the globe have been experiencing high unemployment rates, a drop in household incomes, and gaping holes in the economy.

One way or another, the taxes being implemented by the Gulf state on its citizens will lead to some sort of revolution. The democratization of the regime may happen slowly, but there seems to be a muttering of change on the horizon. Time will tell, and only when the situation is right will these changes become something that is permanent and long-lasting for the Saudi Arabian state.