Dubai - The need for diversification of government revenues in the Middle East countries, accentuated by the drop in oil prices and consequently, the drop in oil revenues, is expected to lead to the introduction of new taxes or an increase in the rates of existing taxes to help support future growth.
"Many regional economies have an ambitious agenda to stimulate economic activity and enhance growth. Nevertheless, tax reforms will need to be smartly designed to allow economies to remain highly attractive to businesses and foreign investments," said Jeanine Daou, Partner and Middle East Leader for Indirect Taxes and Fiscal Policy.
"Most countries in the region are looking to enhance their existing tax systems and explore alternative sources of revenue, notably through a broad based tax system. Among available options, VAT is recognized to be one of the most serious and efficient choices," concluded Daou.
Guidance for implementing tax reforms:
1.Choosing the right tax system
In designing any tax policy measure, emphasis must be placed on having simple, efficient and broad based systems. For example, when implementing a VAT system, governments should avoid the cascading effect and all goods and services, both local and imported, must be treated equally.
2.Implementation of the tax policy
There is a need for clear compliance requirements for taxpayers. Tax administration processes should be in place to enhance voluntary compliance and increase collection notably through e-filing and e-auditing.
3.Ensure understanding of the new tax measures
It is recognisedthat there is a need for engaging stakeholders to have their buy-in and communicate clear messages to taxpayers and citizens on the objectives and the application of the tax measures.
Tax reform is high on the agenda of regional countries. "Egypt's head of Income Tax Authority has made it a priority to introduce a VAT system in the range of 10% - 12%, and we believe this will be a key stepping stone in improving the economic outlook of the country and hope it will set the way for other countries in the region to follow," said Daou.
Egypt serves as a good case study for the region, as the country has recently introduced new tax measures with the objective of increasing revenues and addressing budget deficit. The country introduced a 10% withholding tax on capital gains on privately owned shares or listed shares of Egyptian companies, as well as a 10% withholding tax on dividends paid by Egyptian companies(with a possibility to reduce the rate to 5% in certain cases). Egyptian tax resident individuals will also be taxed on their income from foreign sources, in addition to their Egyptian sources income.
To access the full report please visit http://www.pwc.com/m1/en/publications/paying-taxes-2015-middle-east.jhtml.
-Ends-
About PwC
PwC helps organisations and individuals create the value they're looking for. We're a network of firms in 157 countries with more than 184,000 people who are committed to delivering quality in assurance, tax and advisory services. Tell us what matters to you and find out more by visiting us at www.pwc.com.
Established in the Middle East for 40 years, PwC has firms in Bahrain, Egypt, Iraq, Jordan, Kuwait, Lebanon, Libya, Oman, the Palestinian territories, Qatar, Saudi Arabia and the United Arab Emirates, with around 3000 people(www.pwc.com/me).
© 2014 PwC. All rights reserved
PwC refers to the PwC network and/or one or more of its member firms, each of which is a separate legal entity. Please see www.pwc.com/structure for further details.
Contact:
Mustapha Al Tayech
Tel: +971 4 33 44 930
e-mail: mustapha.altayech@hkstrategies.com
© Press Release 2015
