Seventy percent of governmental subsidies in 2015 undeservingly went to well-to-do people rather than to middle and low income groups who actually need them, Prince Mohammed bin Salman had said in a TV interview while speaking about Saudi Vision 2030. In an apparent effort to correct this anomaly, the Ministry of Labor and Social Development, which oversees the subsidy process mainly related to energy and water prices, launched a Citizens' Account online program. The program seeks to ensure that subsidies reach directly to the beneficiaries, in variable quantities depending on the household income and number of family members. The new subsidy program is an importance milestone in the National Transformation Program. It reflects a stepped-up approach to enhancing government performance to lay the basis for realizing the objectives of Saudi Vision 2030. However, the mechanism is more the means rather than an end. It will be subject to constant verification and analysis of household consumption behaviors. Moreover, innovative saving programs will be initiated to rationalize consumption. The ministry will have to go through the arduous task of ensuring data accuracy for regular review and follow-up of subsidy eligibility. This effort will be based on the new mechanism in view of the large volumes involved. Nevertheless, it is surely a fair system, though subsidy levels will differ month to month for the same family, depending on energy prices and on any new financial burden on the family caused by reforms. The new reforms recently announced include new taxes approved recently by the Council of Ministers. They include the selective tax to be levied in the second quarter of this year on harmful goods such as tobacco and energy beverages. A value-added tax (VAT) is also to be introduced in the first quarter of 2018. One of the objectives of cutting subsidies was to conserve water and energy, including fuel and electricity. Even those with high incomes who were benefiting from subsidized energy will seek to rationalize consumption and conserve energy.
