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VAT . . . a Good Thing?

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The tax-free environment in the GCC is set to change, VAT will help GCC economies experience diversified growth, says Mas Meghji

May 17, 2012 3:18 by

The tax-free environment enjoyed in the GCC is one of the key attractions for businesses and global talent to the region, particularly the UAE. This, however, is set to change, and while experts say the value-added tax might change the attractiveness index of the region temporarily, VAT will help GCC economies experience diversified growth.

For now, the Gulf Cooperation Coun­cil countries have delayed the applica­tion of the planned VAT indefinitely, and the UAE won’t impose any new tax this year. Younis Haji Khouri, Undersecre­tary of the UAE’s Ministry of Finance told a Sharjah-based Arabic newspaper that after consultations among the vari­ous parties concerned in the six-member economic bloc, the GCC states have de­cided to defer the application of VAT until every member is ready with the internal systems and specialized staff required to implement such a tax.

The UAE’s Ministry of Finance has, in cooperation with other concerned authori­ties, prepared a three-year study on the di­mensions of the application of VAT on the UAE society economically and socially, he said, and the report includes the potential scope of VAT, which, when implemented, would include goods and services. While Saudi Arabia has put systems in place and is ready to implement VAT theoretically, Qatar, Bahrain and Oman are working on developing the system. The other two members of the GCC, the UAE and Kuwait, have not made much progress. Although Dubai Customs had plans in 2008 to go ahead with VAT, it has pulled back since, possibly due to admin­istrative and revenue distribution issues.

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