Investigating the tax challenges of introducing VAT in Saudi Arabia: the case of social media influencers and word-of-mouth e-Marketing

Since the 2017 announcement of its introduction to Saudi Arabia, there has been considerable speculation as to how the value-added tax system will be implemented in the country. This has given rise to a wave of insecurity and uncertainty in terms of who will be most impacted by the new taxation system. It has therefore become essential to study the subject.

Social media is widely perceived as an effective platform for marketing through electronic networks in Saudi Arabia. As such, one of the major objectives of this study is to identify and explore the level of tax challenges presented by applying VAT via e-marketing on social media. The study also investigates the potential role the application of VAT may play in consumer economic behaviour in Saudi Arabia.

The mixed methods research approach was chosen to gather the quantitative and qualitative data. The numerical data of the quantitative research approach was conducted through questionnaires with consumers (online) and Chartered Accountants (online). This was supplemented with qualitative descriptive data derived a number of semi-structured interviews with shop owners and social media celebrities Some interviews were conducted with shop owners and social media celebrities via electronic media due to Covid restrictions.

The results show a much stronger trend in responses towards e-marketing on social media on the part of shop owners and social media celebrities. This insight into the behaviour of consumers in response to social media advertising demonstrates that a large majority of the population sample strongly agree that e-marketing through social media language makes purchasing decisions much easier.

Finally, it confirms a number of significant differences in the type of tax challenges faced when applying VAT via e-marketing in Saudi Arabia, particularly from the point of view of Chartered Accountants.