Gulf countries heading towards VAT and 'fiscal revolution'

Ever more likely due to plunging oil prices

12 May, 17:07

    Dubai stock exchange Dubai stock exchange

    (by Virginia Di Marco) (ANSAmed) - ROME, MAY 12 - A fiscal revolution seems on the horizon for Gulf countries. The six members of the Gulf Cooperation Council (GCC) - Saudi Arabia, Bahrain, the UAE, Kuwait, Oman and Qatar - seem to have decided to introduce a value-added tax (VAT).

    Citizens as well as local and international firms are closely watching developments. The question of whether or not it will be introduced has been weighing heavily in regional media over the past few months. The issue has long been under discussion, with the idea first aired in 2007. Little progress has been made in the matter since however, or at least until 2014, when oil prices began to drop and meetings on the possibility stepped up. The latest was last week in Doha (Qatar), where the GCC economic and financial cooperation committee met. Kuwait's national new agency, KUNA, reported statements by the country's economy minister, who announced that the summit had led to the adoption of a draft agreement. The text would call for the application of VAT with support from all the countries involved. A simultaneous introduction in the six states was indicated as a fundamental condition for its success.

    Otherwise, circulation and trade between Gulf nations could easily lead to the trafficking of untaxed good from one country to another, and there would be repercussions on competitiveness.

    No details have been confirmed as to how high the tax would be, though press leaks put it as between 3 and 5%. If the measure is applied - as seems ever more likely - it would mark an enormous shift from an economic and fiscal standpoint for the GCC, the wealth of which is based on oil and gas sales. It would also be a delicate move at the political level, since citizens and businessmen have never before had to deal with anything similar in the area. In order to make it more 'palatable' for consumers, it seems that basic needs such as food and medicine and non-luxury goods will not be taxed.(ANSAmed).

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