Cairo: Saudi Arabia and the United Arab Emirates (UAE), once seen as tax havens, started on Monday applying a value-added tax (VAT), part of their plans to boost revenues after oil prices collapsed more than three years ago.

The 5-per-cent tax will apply to a wide range of items, including: food; clothes; electronics; petrol; phone, water and electricitybills; and hotel reservations.

Saudi Arabia and the UAE are the Gulf region's two biggest economies,and home to large migrant worker populations.

Last year, the two countries said they would implement the VAT as of 2018, in line with an earlier decision by the six-nation Gulf Cooperation Council (GCC).

Other GCC countries - Bahrain, Kuwait, Oman and Qatar - have chosen to postpone enforcing the tax.

The International Monetary Fund had recommended that the Gulf countries introduce the VAT in order to diversify their oil-reliant economies.-DPA