Saudi Arabia triples VAT (15%) instead of 5% to support coronavirus-hit economy.
The kingdom first introduced VAT two years ago as part of efforts to cut its reliance on world crude oil markets.
VAT will increase from 5% to 15% as of 1 July, while the cost of living allowance will be suspended from 1 June.
The allowance of 1,000 riyals ($267; 245 euros) per month to state employees was introduced in 2018 to help offset increased financial burdens including VAT and a rise in the price of petrol.
The Covid-19 crisis wiped at least $17 trillion (Dh62.4tn) from stock markets globally and led to governments rolling out over $8tn in stimulus packages, as global trade came to a standstill and countries went into lockdowns.
Oil prices fell more than 60 per cent from January's peak this year. The decline in demand from the outbreak, which brought air and land transportation to a standstill following worldwide lockdowns, resulted in a decline equivalent to losing all of India's energy needs, India has the third highest total primary energy consumption globally after China and the US.
The pandemic has tipped the global economy into a recession, set to be the deepest since the Great Depression of the 1930s, with output shrinking 3% this year.
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