"For autocratic rulers, though, the main problem with taxes is that the higher they are the more likely it is that people will demand a say in how the money is spent. It was the cry of "no taxation without representation" that spurred the American revolution in the 18th century, and a quarrel between King Charles I and his parliament over tax that helped to trigger the English revolution in the 17th century.
As a rule of thumb, high taxes can act as a spur towards democracy and accountable government. Conversely, where taxes are low the pressure for democracy and accountability is usually less.
Although indirect taxes such as VAT tend to arouse less hostility than direct taxes (such as income tax, which is not proposed for Saudi Arabia), the imposition of some completely new taxes coupled with lifting of subsidies is scarcely going to pass unnoticed by ordinary Saudis and many of them will feel the pinch.
In an interview with Thomas Friedman of the New York Times last November, Prince Muhammad conceded that his proposed economic changes "could have political ramifications". In his more recent interview with the Economist, however, he dismissed the idea that they could require a remaking of the social contract between rulers and ruled:
Q: You believe you can have more taxation without more representation?A: There are no taxes.Q: But you are introducing taxes.A: We’re talking about different forms of taxes. We’re talking about VAT, it will not be applied to any of the basic products; it will be on accessories.Q: The VAT will not be on basic products.A: Such as water, dairy, milk …Q: They will be excluded?A: No doubt. If they will influence the price.Q: I see. But you can have that kind of taxation without an increase in representation?A: Again, one thing is not related to the other. This is not a decision from the government against the people. This is the decision of Saudi Arabia. With the government that represents the people. Before any decision to reform, we work on many workshops that represent many people.
Finally, and potentially most dangerous of all for the regime, is the question of privatisation. Asked what he will privatise, Prince Muhammad told the Economist:
"Health care, educational sector, some military sectors such as military industries and some state-owned companies. It will decrease some of the pressure that the government has, and some of them may create good profit."
The problem here is that the public sector in Saudi Arabia (and other Arab countries too) doesn't primarily exist to provide services to the public; it's a way for regimes to buy loyalty by providing salaries in exchange for often minimal – and sometimes purely notional – amounts of work."
