Accounting to play critical role in realizing Saudi's Vision 2030

Correct accounting can help in getting Saudi's economic narrative right

  
13 March 2017

By Layan Damanhouri

RIYADH — The introduction of the value-added tax on goods and services in the Kingdom shows responsible government because that’s driven by the need to diversify government revenue, according to a chartered accountant’s perspective.

Michael Izza, Chief Executive of the Institute of Chartered Accountants in England and Wales (ICAEW), said “for decades, they’ve been discussing it. This time there is a political will to do it. The GST is a very practical demonstration of the need to diversify.”

This comes at a time where the main source of the Saudi government’s revenue has fallen dramatically. Meanwhile, many countries around the world are working toward burning fossil fuels and relying less on oil.

Most countries are applying it or have recently introduced it. In many countries such as the UK, the biggest source of income is personal tax while the second is the VAT amounting to 135 billion pounds per year.

“Citizens need to realize the government has commitments. The alternatives are not much, except income tax or corporate tax,” said Izza who emphasized accounting’s key role in realizing the Kingdom’s Vision 2030 at the fourth accounting and auditing conference recently held by The Saudi Organisation for Certified Public Accountants (SOCPA) and the ICAEW here.

“If businesses don’t pay it, that’s fraud,” he said, adding that the GCC remains as a trusted and attractive market for investors because of its stability. “In terms of finances, people want to deal with governments that are sound and take financial management seriously.”

Decision-makers at the conference discussed several themes, including sustaining Saudization, challenges in the audit profession, creating a successful business environment, the introduction of international standards and the implementation of VAT.

“The accountancy profession in Saudi Arabia has an important role to play in achieving Vision 2030,” Izza said in an interview with Saudi Gazette. “As the Kingdom progresses, SOCPA can help in getting that economic narrative right by going beyond things like financial reporting, financial accounting, tax, and make a contribution at how the Kingdom looks at achieving some of their goals.”

As Saudi Arabia is almost completing the first quarter since its adoption of the International Financial Reporting Standards (IFRS), it seeks to create an attractive business environment for investors. “The good thing about Saudi Arabia adopting IFRS is they’re you’re using the same standard as another 130 countries around the world,” said Izza. “This is the language the businesses use to tell the economic story.”

Asked about the future of the accountancy profession, he said new technological advances have changed the dynamics of the accountancy profession. Blockchain for instance has replaced statistical sampling whereby the former is a distributed database that has the ability to log each transaction to be logged and monitored in real time, bringing revolutionary change in the accounting industry.

Blockchain shapes one factor that aims to gain trust of foreign investors.

“Right now, that technology is largely controlled by the Big Four,” said Izza. “We’re keen that that technology becomes widely available so that it can be used by mid-size and small firms.”

© The Saudi Gazette 2017