DUBAI: Gulf residents and companies should brace themselves for new direct and indirect taxes that could be imposed to countervail the continued weakness in oil prices, experts say.
The Gulf Cooperation Council (GCC) region, which historically has been dependent on oil revenues to power their economies, has been weighed by depressed crude prices because of a global economic slowdown.
The rationale for the possible imposition of new taxes, according to tax experts, was to give Gulf states new revenue streams to fund their budgets.
Taxes could be imposed on wealth and property, as well as corporates, while income tax will also surely come but it will be introduced at the far end in the UAE and GCC, a UAE newspaper reported. They however would be implemented in phases rather than in one go.
“Looking at the budgets and oil prices, GCC governments will have to introduce new taxes but they cannot bundle it in one go,” Rasheed Al-Qenae, the head of tax at KPMG Middle East and South Asia and managing partner at KPMG Kuwait, said.
Gulf governments are now focusing on introducing value-added tax in the region, he said.
“First it is going to be VAT and then on top of that will be luxury tax,” he said, adding that the contribution of taxes to the GCC budget will rise in the coming five to 10 years.
The UAE, Saudi Arabia and Bahrain have imposed 5 percent VAT on goods and services. The UAE has also implemented 100 percent tax on tobacco and energy drinks and 50 percent on carbonated drinks.