In a historic decision the Saudi government on 27 March announced that the income tax rate on its state-owned oil giant, Saudi Aramco, would be drastically cut from 85% to 50%.

In cutting the income tax paid on the company’s profit, the government has put to bed months of speculation, and provided long-awaited transparency on an issue that will have critical importance in determining the success of the 5% share listing of Aramco scheduled for late-2018.

The new rate is effective...