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Saudi Arabia is tripling its value added tax (VAT) as part of austerity measures to support its coronavirus-affected economy.
The Riyadh government also said it will suspend its cost-of-living allowance to shore up state finances.
The oil-rich nation has seen its revenues fall as the impact of the pandemic has forced world energy prices to fall.
The kingdom first introduced VAT two years ago as part of efforts to reduce its dependence on global crude oil markets.
Saudi Arabia’s state news agency said that VAT will increase from 5% to 15% from July 1, while the cost of living subsidy will be suspended from June 1.
“These measures are painful but necessary to maintain financial and economic stability over [the] in the medium and long term … and overcome the unprecedented coronavirus crisis with as little damage as possible, “Finance Minister Mohammed al-Jadaan said in the statement.
The announcement came after state spending topped revenue, pushing the kingdom into a $ 9 billion (£ 7.2 billion) budget deficit in the first three months of the year.
That’s because oil revenues in the period fell nearly a quarter of the year before to $ 34 billion, dropping total revenues by 22%.
At the same time, Saudi Arabia’s central bank saw its foreign reserves drop in March at its fastest rate in at least two decades and its lowest level since 2011.
Measures to combat the impact of the coronavirus are expected to slow the pace and scale of economic reforms launched by Crown Price Mohammed bin Salman.
Last year, Saudi Arabia raised a record $ 25.6 billion in the initial public offering of shares of state oil giant Aramco in Riyadh.
The sale of shares was at the heart of Crown Prince Mohammed bin Salman’s plans to modernize the economy and stop depending on oil.
