Saudi Has Most Attractive Tax Framework Among G20 Nations

Saudi Arabia has the strongest tax and regulatory framework across all the G20 countries, according to a survey by Ernst and Young (E&Y).

The Kingdom ranked first in tax regulation ahead of Canada, the UK, Japan, Germany and the European Union, as per E&Y’s G20 Entrepreneurship Barometer.

The barometer is based on a survey of over 1,500 leading entrepreneurs and qualitative data on entrepreneurial conditions across the G20 countries.

The survey also showed that Saudi imposes a particularly light tax burden on entrepreneurs as compared to its European counterparts.

The Kingdom requires only three tax payments to be made by companies each year, while double figures are common in other G20 countries. The average time spent by businesses on their tax affairs in Saudi amounts to 77 hours, the lowest across the G20 (2010-12 average), said E&Y.

In addition, the cost of setting up a business in Saudi is around a third less than the G20 average (2010-12 average). In terms of employment regulations, labour taxes in teh Kingdom are also among the lowest in the G20.

However the barometer indicated that developing an entrepreneurship culture is still a primary challenge in the Kingdom.

In the survey, entrepreneurs from the country pointed out that attitude towards risk and fear of failure is reflected in the local laws governing business in the country. Currently the financial costs of a business failure in the Kingdom is very high, with insolvency costs the highest among G20 countries.

“From our discussions with business owners in Saudi Arabia, we found that risk aversion is a tough challenge to overcome from both entrepreneurs and investors,” said Ashraf Abu-Sharkh, strategic growth markets leader, E&Y MENA.

“As the country invests more in entrepreneurial initiatives, more role models will need to emerge to encourage and inspire future entrepreneurs.”

Saudi has however improved its ranking in the availability of entrepreneurs’ support systems such as networks, mentoring and incubators.

According to the barometer, around 43 per cent of the entrepreneurs said that access to business incubators has improved over the last three years. Around 31 per cent of the entrepreneurs surveyed said that access to funding sources like private equity has also improved considerably.

“Some progress is being made in access to funding, such as a government scheme to guarantee 50 per cent of certain bank loans, and a corporate venture capital fund backed by Aramco, a state oil company. However, more needs to be done to reduce the bureaucracy, paperwork and time needed to qualify for such programs,” said Waleed AlShubaili, government & public sector leader, E&Y Saudi Arabia.