The impact of new VAT enforcement on financial performance: Evidence from Saudi Arabia non-financial listed companies using the event study and ARMA model
This paper examines the influence of the new 15 % Value Added Tax (VAT) enforcement on non-financial listed companies in Saudi Arabia. By comparing financial data from 2019, before the VAT implementation and the COVID-19 pandemic, with data from 2020, during both the VAT increase and the pandemic, t...
| Main Authors: | , , , |
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| Format: | Article |
| Language: | English |
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Elsevier
2024
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| Online Access: | http://psasir.upm.edu.my/id/eprint/115962/ http://psasir.upm.edu.my/id/eprint/115962/1/115962.pdf |
| _version_ | 1848866899737182208 |
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| author | Al-Otaibi, Mohammed Ibrahim Mohd Nor, Normaziah Yusri, Yusniyati Guzaiz, Nedaa |
| author_facet | Al-Otaibi, Mohammed Ibrahim Mohd Nor, Normaziah Yusri, Yusniyati Guzaiz, Nedaa |
| author_sort | Al-Otaibi, Mohammed Ibrahim |
| building | UPM Institutional Repository |
| collection | Online Access |
| description | This paper examines the influence of the new 15 % Value Added Tax (VAT) enforcement on non-financial listed companies in Saudi Arabia. By comparing financial data from 2019, before the VAT implementation and the COVID-19 pandemic, with data from 2020, during both the VAT increase and the pandemic, the research aims to uncover the consequences of this tax policy change. Utilizing charts, tables, and an event study analysis approach with the Autoregressive Moving Average (ARMA) model, we investigated key financial indicators such as Shareholders' Equity (SE), Total Income (TI), Total Revenues (TR), Net Income (NI), Total Expenses (TE), Other Changes in Operating Activity (COA), and Cash at the End of the Period (CEP). The findings reveal significant financial impacts, highlighting companies' challenges due to the increased tax burden. Shareholders' Equity dropped from an average of 11.55 million to 4.57 million, and Total Income and Total Revenues decreased from approximately 1.73 million to 316,234 and from 1.95 million to 331,605, respectively. Net Income sharply declined from 406,109 to 74,624, and Total Expenses decreased from about 1.18 million to 223,495. Other Changes in Operating Activity shifted from a negative mean of −168,936 to a positive 523,520, and Cash at the End of the Period fell from 1.99 million to 666,663. These results suggest that the VAT increase has significantly strained companies' financial performance, emphasizing the need to consider such tax reforms carefully, particularly in developing countries. The study concludes that while the VAT increase aims to enhance government revenues, it imposes substantial financial strain on companies, potentially leading to long-term economic repercussions. Policymakers should consider these implications and implement practical measures to optimize the VAT system and support business resilience in the face of such reforms. © 2024 The Authors |
| first_indexed | 2025-11-15T14:27:56Z |
| format | Article |
| id | upm-115962 |
| institution | Universiti Putra Malaysia |
| institution_category | Local University |
| language | English |
| last_indexed | 2025-11-15T14:27:56Z |
| publishDate | 2024 |
| publisher | Elsevier |
| recordtype | eprints |
| repository_type | Digital Repository |
| spelling | upm-1159622025-04-15T02:03:43Z http://psasir.upm.edu.my/id/eprint/115962/ The impact of new VAT enforcement on financial performance: Evidence from Saudi Arabia non-financial listed companies using the event study and ARMA model Al-Otaibi, Mohammed Ibrahim Mohd Nor, Normaziah Yusri, Yusniyati Guzaiz, Nedaa This paper examines the influence of the new 15 % Value Added Tax (VAT) enforcement on non-financial listed companies in Saudi Arabia. By comparing financial data from 2019, before the VAT implementation and the COVID-19 pandemic, with data from 2020, during both the VAT increase and the pandemic, the research aims to uncover the consequences of this tax policy change. Utilizing charts, tables, and an event study analysis approach with the Autoregressive Moving Average (ARMA) model, we investigated key financial indicators such as Shareholders' Equity (SE), Total Income (TI), Total Revenues (TR), Net Income (NI), Total Expenses (TE), Other Changes in Operating Activity (COA), and Cash at the End of the Period (CEP). The findings reveal significant financial impacts, highlighting companies' challenges due to the increased tax burden. Shareholders' Equity dropped from an average of 11.55 million to 4.57 million, and Total Income and Total Revenues decreased from approximately 1.73 million to 316,234 and from 1.95 million to 331,605, respectively. Net Income sharply declined from 406,109 to 74,624, and Total Expenses decreased from about 1.18 million to 223,495. Other Changes in Operating Activity shifted from a negative mean of −168,936 to a positive 523,520, and Cash at the End of the Period fell from 1.99 million to 666,663. These results suggest that the VAT increase has significantly strained companies' financial performance, emphasizing the need to consider such tax reforms carefully, particularly in developing countries. The study concludes that while the VAT increase aims to enhance government revenues, it imposes substantial financial strain on companies, potentially leading to long-term economic repercussions. Policymakers should consider these implications and implement practical measures to optimize the VAT system and support business resilience in the face of such reforms. © 2024 The Authors Elsevier 2024 Article PeerReviewed text en cc_by_4 http://psasir.upm.edu.my/id/eprint/115962/1/115962.pdf Al-Otaibi, Mohammed Ibrahim and Mohd Nor, Normaziah and Yusri, Yusniyati and Guzaiz, Nedaa (2024) The impact of new VAT enforcement on financial performance: Evidence from Saudi Arabia non-financial listed companies using the event study and ARMA model. Heliyon, 10 (20). art. no. e39137. ISSN 2405-8440; eISSN: 2405-8440 https://linkinghub.elsevier.com/retrieve/pii/S2405844024151687 10.1016/j.heliyon.2024.e39137 |
| spellingShingle | Al-Otaibi, Mohammed Ibrahim Mohd Nor, Normaziah Yusri, Yusniyati Guzaiz, Nedaa The impact of new VAT enforcement on financial performance: Evidence from Saudi Arabia non-financial listed companies using the event study and ARMA model |
| title | The impact of new VAT enforcement on financial performance: Evidence from Saudi Arabia non-financial listed companies using the event study and ARMA model |
| title_full | The impact of new VAT enforcement on financial performance: Evidence from Saudi Arabia non-financial listed companies using the event study and ARMA model |
| title_fullStr | The impact of new VAT enforcement on financial performance: Evidence from Saudi Arabia non-financial listed companies using the event study and ARMA model |
| title_full_unstemmed | The impact of new VAT enforcement on financial performance: Evidence from Saudi Arabia non-financial listed companies using the event study and ARMA model |
| title_short | The impact of new VAT enforcement on financial performance: Evidence from Saudi Arabia non-financial listed companies using the event study and ARMA model |
| title_sort | impact of new vat enforcement on financial performance: evidence from saudi arabia non-financial listed companies using the event study and arma model |
| url | http://psasir.upm.edu.my/id/eprint/115962/ http://psasir.upm.edu.my/id/eprint/115962/ http://psasir.upm.edu.my/id/eprint/115962/ http://psasir.upm.edu.my/id/eprint/115962/1/115962.pdf |