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Still, Saudi Arabia is facing a budget deficit until at least 2023.
Meanwhile Vera Clement, a mother and assistant manager of restaurants from France who has lived in Dubai for three years, said: 'If you compare with Europe, I don't think it's as expensive.
Only in rent and food.''We are going to be more careful when we buy something,' she added.
Stores, gyms and other retailers are trying to make the most of the remaining tax-free days in Saudi Arabia and the UAE, encouraging buyers to stock up before the VAT is rolled out on New Year's Day.
Even with a five per cent jump in prices, the tax rate is still significantly less than the average VAT rate of 20 per cent in some European countries.
IMF Mideast director Jihad Azour said VAT is part of a long-term tax reform to help Gulf states reduce their dependence on oil revenues.'It is something that will allow the government to diversify revenues,' he said, adding that any immediate slowdown in spending by consumers next year will be compensated for with government investments.