IMF Urges Gulf States To Introduce Income Taxes

by Lorys Charalambous, Tax-News.com, Cyprus

17 October 2001

The International Monetary Fund (IMF) has claimed that the Gulf states need to realise that they can not depend on crude oil sales alone to help them achieve sustainable economic growth and recommended that the Gulf Cooperation Council (GCC) member states implement five types of taxes such as income tax, corporate profits tax, consumption tax, and VAT.

In a report entitled "A Strategy For Sustainable Development And Economic Stability in the GCC," the IMF stated: 'GCC states should start introducing such taxes which will expand non-oil revenues ... GCC governments should also work to attract more foreign capital, mainly direct investment, which plays a vital role in the domestic economy in a world heading fast towards economic globalisaton.'

The six members of the GCC (Saudi Arabia, Bahrain, UAE, Kuwait, Oman, Qatar) control around 45 per cent of the world's oil.

This is the second time that the IMF has called upon the GCC states to introduce the taxes but the GCC is reluctant to do so; instead its members have charged fees on some core services to help bring in more money.

Traditionally, the bulk of the GCC members' income comes from its oil export industry which accounts for over two thirds of national income. But the IMF warned that oil sales are as much at the mercy of global volatile markets as every other commodity and recommended that GCC states should 'step up reforms, lower subsidies, upgrade the financial system and the stock market and allow foreigners to fully own projects.'

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