White Land Tax: Evidence in the Kingdom of Saudi Arabia

Abstract

Taxes on land and property contribute to one of the revenue sources in all countries. Notably, there are countries, which do not rely on property taxation as a source of revenue such as Kingdom of Saudi Arabia (henceforth KSA). The main revenue of KSA derives from oil, which constitutes 73% of the total government's revenue. On 23 rd March 2015, the government has announced a 2.5% rate of "white land tax" under the Royal Decree M/4, dated November 2015, which may change the landscape of property market in KSA. Ideally, it will be imposed on vacant land

Transformation of the Saudi Housing Sector through an Enabling Approach to Affordable Housing

“…In the KSA, there is a significant amount of unused developed land in urban areas, but a large portion of it is owned by landlords and real estate companies, who view it as an investment opportunity to be sold later at higher prices [52]. Even though the government has implemented a 'white land' program to increase the supply of developed land, its impact remains limited [38]. Similarly, in China, Taruvinga et al [14] found that the implementation of World Bank's enabling approach instruments showed that liberalization of the housing markets resulted in an increase in private-sector capital in the housing market and that the elites had captured the benefits of the enabling approach.…”

“…Regarding property taxation, the government has launched the White Land program, which applies fees to residential vacant land to increase the supply of residential land to the housing market [38]. In 2015, a 2.5% rate of 'white land tax' was implemented under the Royal Decree M/4, dated November 2015, which seeks to change the landscape of the property market in the country.…”

“…In 2015, a 2.5% rate of 'white land tax' was implemented under the Royal Decree M/4, dated November 2015, which seeks to change the landscape of the property market in the country. Ideally, the law should be imposed on vacant residential and commercial land located in urban areas; however, these fees cannot be considered and categorized as property taxation [38]. The aim of this program is to encourage residential development and discourage land speculation within urban areas.…”

“…Recently, with the transformation of the Saudi Vision 2030, the government has worked to enable real estate developers to obtain financing solutions (from private funding entities) through partnerships and engagement with commercial banks to provide access to finance for real estate developers in the housing market [10]. Challenged by the concentration of lending, the cost of financing, and the lack of investor diversity and availability of long-term funding for lenders [23] (C) Enforce foreclosure law Real Estate Register Law (Article 28) [38] (D) Ensure prudential regulation The SAMA requires banks to perform credit checks and assess the borrower's ability to repay the loan [39] (E) Introduce better loan instruments…”

Taxation as an Alternative to Encourage Idle Land Development

“…The alternative enforcement approach of imposing an idle land tax should be taken into consideration to urge landowners to develop their idle land. Referring to other countries, the tax imposition approach to these idle lands is implemented, such as in Saudi Arabia (Zakaria et al, 2019), Philippines (Lebrilla, 2016), Thailand (Medina, 2020;Fung and Mcauley, 2020a), Grenada (Godfrey, 2014), Cuba (Castro Morales, 2018; González and Alfonso, 2018), India (CWAS, 2020), Cambodia (IPS Cambodia, 2019;Fung and Mcauley, 2020b), South Africa (Mosha, 2010) and Japan (Japan Property Central, 2019).…”