19 July 2017
The United Arab Emirates (UAE) and Saudi Arabia are likely to be the only countries from the six Gulf Cooperation Council to meet the January 1, 2018 deadline to implement a new value-added tax, a senior business analyst said.
The GCC trade bloc, which includes Saudi Arabia, the UAE, Qatar, Bahrain, Oman and Kuwait had agreed in 2016 to introduce VAT on January 1, 2018, as a means to diversify government revenue sources and reduce reliance on crude oil exports after the oil prices’ sharp fall that began in mid-2014.
Younis Al Khouri, under-secretary at the UAE’s finance ministry told Zawya in an interview earlier this year that the new VAT will be implemented simultaneously across the GCC starting January 1, 2018.
But many businessmen and analysts are skeptical about the likelihood of a simultaneous implementation, with some countries more advanced on the preparations than others. Tax experts have last year told Zawya that the UAE and Saudi Arabia are expected to lead the region in the implementation of VAT.
“From a GCC perspective, we are hearing that not all countries are ready to go on the first of January,” Nick Maclean, the managing director of the CBRE consultancy firm in the Middle East, told Zawya in an interview on Tuesday.
“Saudi and the UAE (are) as ever leading the rest of the region… I think it is likely that those two countries will implement VAT on the first of January of next year,” he added.
The UAE’s finance ministry last week released new details about the tax’s impact on certain categories of businesses. The Saudi General Authority of Zakat and Tax said in May it was planning to publish a VAT draft soon.
But Maclean said more details about the new tax still need to be released soon.
“The regulatory framework is a key issue at the moment because we have a broad framework but we don’t have any details and the devil of course is in the details,” he added. The UAE’s President Sheikh Khalifa bin Zayed Al Nahyan is expected to ratify the VAT law in the UAE by next month.
Qatar
Maclean said he does not expect the Qatar crisis to delay the implementation of VAT in the GCC.
Saudi Arabia, the UAE, Bahrain and Egypt imposed sanctions on Qatar on June 5, including cutting diplomatic and transport ties with the small Gulf state. The four Arab states also accused Qatar of financing militant groups and allying with their regional arch-foe Iran. Qatar has denied all allegations.
“I would be very surprised if the political situation within the GCC delayed the VAT. If there were delays in some locations, it will be more of economic decisions,” Maclean said. However, he said Qatar’s position on whether it will implement the VAT or not is now vague.
Maclean said he is hopeful the region’s governments would be willing to give a grace period or special treatment to businesses if needed. He also said a common IT platform is not being discussed at the moment. Such a system could get implemented in the future but not on a wide scale and only between two or three GCC countries that have strong political and business ties, such as Saudi Arabia and the UAE, he added.
More than 5 percent?
Maclean also said that the VAT’s current 5 percent rate could increase over time and other forms of taxes could be introduced at a later stage but it is unlikely to happen next year, when the VAT is introduced in the region for the first time.
“If you look at sales or VAT across the world, I think the average is about 15 percent so I think it is likely that there will be more forms of taxation introduced in the region, may be even income tax,” Maclean said.
The GCC region has been for decades branded itself as a tax-free zone. But the oil prices’ drop led the Gulf Arab nations that rely mainly on oil and gas for national income to look into taxes to generate alternative sources of income.
Saudi Arabia, the world’s largest exporter of oil, had last May implemented taxes on several items including tobacco products and fizzy drinks. The kingdom has last year announced plans to levy a tax on undeveloped lands.
Maclean said the GCC governments need to closely monitor the tax impact on business.
“The lessons learned by other governments across the world is that the best time to increase tax is when business and the economy is extremely healthy,” Maclean said, but he warned that governments need “to be careful the tax burden does not stifle entrepreneurs or the general development of the economy”.
© Express 2017
The United Arab Emirates (UAE) and Saudi Arabia are likely to be the only countries from the six Gulf Cooperation Council to meet the January 1, 2018 deadline to implement a new value-added tax, a senior business analyst said.
The GCC trade bloc, which includes Saudi Arabia, the UAE, Qatar, Bahrain, Oman and Kuwait had agreed in 2016 to introduce VAT on January 1, 2018, as a means to diversify government revenue sources and reduce reliance on crude oil exports after the oil prices’ sharp fall that began in mid-2014.
Younis Al Khouri, under-secretary at the UAE’s finance ministry told Zawya in an interview earlier this year that the new VAT will be implemented simultaneously across the GCC starting January 1, 2018.
But many businessmen and analysts are skeptical about the likelihood of a simultaneous implementation, with some countries more advanced on the preparations than others. Tax experts have last year told Zawya that the UAE and Saudi Arabia are expected to lead the region in the implementation of VAT.
“From a GCC perspective, we are hearing that not all countries are ready to go on the first of January,” Nick Maclean, the managing director of the CBRE consultancy firm in the Middle East, told Zawya in an interview on Tuesday.
“Saudi and the UAE (are) as ever leading the rest of the region… I think it is likely that those two countries will implement VAT on the first of January of next year,” he added.
The UAE’s finance ministry last week released new details about the tax’s impact on certain categories of businesses. The Saudi General Authority of Zakat and Tax said in May it was planning to publish a VAT draft soon.
But Maclean said more details about the new tax still need to be released soon.
“The regulatory framework is a key issue at the moment because we have a broad framework but we don’t have any details and the devil of course is in the details,” he added. The UAE’s President Sheikh Khalifa bin Zayed Al Nahyan is expected to ratify the VAT law in the UAE by next month.
Qatar
Maclean said he does not expect the Qatar crisis to delay the implementation of VAT in the GCC.
Saudi Arabia, the UAE, Bahrain and Egypt imposed sanctions on Qatar on June 5, including cutting diplomatic and transport ties with the small Gulf state. The four Arab states also accused Qatar of financing militant groups and allying with their regional arch-foe Iran. Qatar has denied all allegations.
“I would be very surprised if the political situation within the GCC delayed the VAT. If there were delays in some locations, it will be more of economic decisions,” Maclean said. However, he said Qatar’s position on whether it will implement the VAT or not is now vague.
Maclean said he is hopeful the region’s governments would be willing to give a grace period or special treatment to businesses if needed. He also said a common IT platform is not being discussed at the moment. Such a system could get implemented in the future but not on a wide scale and only between two or three GCC countries that have strong political and business ties, such as Saudi Arabia and the UAE, he added.
More than 5 percent?
Maclean also said that the VAT’s current 5 percent rate could increase over time and other forms of taxes could be introduced at a later stage but it is unlikely to happen next year, when the VAT is introduced in the region for the first time.
“If you look at sales or VAT across the world, I think the average is about 15 percent so I think it is likely that there will be more forms of taxation introduced in the region, may be even income tax,” Maclean said.
The GCC region has been for decades branded itself as a tax-free zone. But the oil prices’ drop led the Gulf Arab nations that rely mainly on oil and gas for national income to look into taxes to generate alternative sources of income.
Saudi Arabia, the world’s largest exporter of oil, had last May implemented taxes on several items including tobacco products and fizzy drinks. The kingdom has last year announced plans to levy a tax on undeveloped lands.
Maclean said the GCC governments need to closely monitor the tax impact on business.
“The lessons learned by other governments across the world is that the best time to increase tax is when business and the economy is extremely healthy,” Maclean said, but he warned that governments need “to be careful the tax burden does not stifle entrepreneurs or the general development of the economy”.
© Express 2017
