Shops in Saudi Arabia are reportedly increasing prices to avoid having to handover small change to consumers following the introduction of value added tax.
The 5 per cent tax rate has caused problems for shop owners in both the UAE and Saudi Arabia since it was implemented on January 1 due to an apparent lack of small coins in circulation.
Abu Dhabi’s Department of Economic Development initially gave shop owners permission to round up prices by up to Dhs0.20 last month before reversing the decision following assurances of sufficient coins from the central bank.
The Saudi Arabian Monetary Authority (SAMA) has similarly assured that there are enough coins distributed in the market and available at banks.
It has asked shop owners to sue banks if they refuse to hand over the coins asked for.
Despite this, Arabic newspaper Makkah reported on Sunday that shops are instead choosing to raise prices so when VAT is calculated there is no need for small coins.
The publication cited the example of a well known bakery in Makkah city, which has increased the price of pastries from SAR1.5 ($0.40) to SAR1.9 so the additional 5 per cent VAT brings the total to SAR2 ($0.53).
Similarly, a fast food restaurant has increased the price of a meal from SAR12 ($3.20) to SAR12.4 so customers pay SAR13 ($3.47) after VAT, it said.
A shop owner told the publication that prices were fixed to round numbers, as small coins were not always available.
However, the kingdom’s Consumer Protection Society said any such increases were not justified and urged customers to inform the Ministry of Commerce and Investment of any unnecessary price increases.