GCC States Move Towards Introducing VAT

Gulf states have agreed to formulate a general framework to introduce value-added tax (VAT) in the region, state news agency WAM reported.

The decision was taken at a meeting of the under secretaries of the ministries of Economy of the GCC in Doha and comes in the background of recent low oil prices putting many countries under the threat of running a budget deficit.

Under-Secretary of Kuwait’s Finance Ministry Khalifa Hamada said that a legal team has been assigned to finish the framework, which is to be submitted at a meeting of GCC ministers in Qatar this May.

Gulf countries have been mulling the introduction of VAT since 2007 in an effort to diversify their revenues.

However, discussions, which have been held jointly in order to ensure that no country will lose out in competition with others, have been long drawn out.

Under-secretary at the UAE Ministry of Finance Younis Hajj al-Khoori said earlier this year that the GCC was still trying to clear out the contention issue of which sectors should be taxed. Some countries do not want the levy on food, for example, while others want to exclude healthcare.

Al Khoori said that the committee was looking at a levy between three and five per cent but emphasised that nothing had been finalised yet.

GCC states have been urged by global financial organisations to implement VAT to ensure a steady flow of government revenues and to act as a buffer against oil price volatility.

However, member states have also been worried about reducing their desirability to businesses by driving up costs.