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Saudi Arabia thirty years ago – the mother of all U-turns

November 8, 2017


Those of you who follow events in Saudi Arabia will be used to the description by many Saudi-watchers of Crown Prince Mohammed bin Salman as impulsive.

That may or may not be the case, and I certainly think that compared to Donald Trump he’s the epitome of cool calculation. The same pundits also tend to characterise the country’s leaders over the three decades leading up to Prince Mohammed’s rise to power as being rather stodgy, conservative and not given to hasty decisions. By and large – and I speak as someone who spent quite a lot of time living in the Kingdom during that period – I would agree that the reigns of King Fahad and King Abdullah were not exactly dynamic. Such change as took place did not take the breath away.

But there was one notable exception. Over three successive days in January 1988, the Saudi equivalent of the Grand Old Duke of York marched his men up to the top of the hill and then marched them down again.

The events of those three days should be seen against the backdrop of the Kingdom going through one of its lean periods, thanks to the low price of oil at the time. Any opportunity to raise additional revenue was not to be sniffed at.

Here’s what happened.

Day 1 – January 4

Tax 1

The Minister of Finance announced the reintroduction of income tax for expatriate workers, of whom I was one. This was a big deal. The Minister pointed out that there had been income tax fifteen years before, but that it had been abolished

However, the vast majority of foreign workers arrived after 1973, and had no memory or expectation of being taxed. In fact, it was the tax-free salaries that led many of them to take up employment in Saudi Arabia in the first place. Especially for those who worked away from the cities, in the oil and construction industries, salaries were generous but working conditions were hard.

So the prospect of being taxed came as a shock. Many western expatriates tendered their resignations on the spot.

What happened next was that employers realised to their horror that if they wanted to keep their best people, they would have to pay the tax for them. Form their point of view the imposition of income tax was therefore a tax on them rather than on their staff.

I was told at the time that a delegation of big business owners sought an audience with King Fahad, and told him of the adverse implications – to them at least – of the measure.

Day 2 – January 5

Tax 2

The Saudi Gazette, one the two main English language daily newspapers, quoted the Vice-Minister of Finance and National Economy as saying that the precise details of the taxation regime had not yet determined.

This came as something of a surprise to worried onlookers, since normally such a major decision would have been thought out in detail beforehand. Perhaps it had, but influential figures in the government had started to row back.

Day 3 – January 6

Tax 3.jpg

A mere two days after the original announcement, the King announced that the imposition of income tax was cancelled. As the Arab News – the other English language paper – reported it, the decision was met with widespread acclaim. Predictably, business leaders thought that this was a jolly good thing. And in keeping with the flowery tone adopted by the media when reporting popular decisions of the monarch, the paper said that the King’s “noble move leaves expats awash with joy”.

Personally, I wasn’t awash with joy. More incredulous that I had witnessed a U-turn of monumental proportions, which is why I kept the press cuttings you see above.

Nor were a number of those who resigned their jobs on Day 1 too enthralled. Quite a few of them found themselves proud possessors of exit-only visas. They were not a essential as they thought they were.

Those bizarre three days in Saudi Arabia reminded me that the King’s power – said to be absolute – actually depended on consent from a number of powerful interests, of which the business community was one.

Quite a contrast to the events of the past week, in which Prince Mohammed has locked up a number of senior business owners on suspicion of corrupt activities.

Which leads me to suspect that today, if a delegation of business leaders still at liberty approached the Crown Prince or his father the King to protest against an unpopular measure, they might find themselves joining their colleagues at the Ritz Carlton Hotel, where all the detainees are being held.

How things have changed. Whether or not for the better is not for me to judge. But looking back at the events of January 1988 makes me wish that another unpopular and poorly thought-out measure could so easily be overturned at the whim of a monarch.

Unfortunately Brexit will not be so easy to kill, whatever the Queen might think.

  1. Oh brother… This is so good & marvellous that I just wish I did Social Meedja, so I could encourage more people, if they would wish, to have the profound privilege of reading it – as many as conceivably possible.

    I wish I could just click on every single one of those social media buttons and make it happen.

    But I’m afraid that this would re-engage me with a malevolent and ultimately destructive habit, I fear, that would probably do more harm than good,,, to me I mean especially, but not exclusively. It would be like giving a heroin addict who’s been clean for a good few years a free bus-pass to smack central and the mainline. I’m certain you know what I mean Steve. But I’m still sorry man. And I’m dead sorry for the poor people who never get to read this wondrous stuff…

    Sorry… Best… And Thanks.

  2. Thanks Abdullah. I agree, it’s an excellent piece. MBS needs to be very careful about his choice of foreign friends, and needs to set about building consensus at home – though not the kind that leads to inertia. S

  3. Andrew Robinson permalink

    Ah yes! I remember it well…… although I had forgotten. This sort of thing is not confined to the Middle East. All children at primary school were to learn English in France from Day One – announced with much fanfare about 15 years ago. Then the Ministry realised that 95% or so of the teachers were incapable of doing it, and suddenly it was “under study”.

    • Hah! Under study is a phrase for all seasons. Not surprised they rolled back that one… S

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