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GCC Adopts Draft VAT Agreement: Report

by Lorys Charalambous,, Cyprus

15 May 2015

Officials from the member states of the Gulf Cooperation Council (GCC) have concluded a draft agreement on implementing a GCC-wide value-added tax.

The agreement was reached at the 100th meeting of the GCC Financial and Economic Cooperation Committee (FECC) in Doha.

Kuwaiti Finance Minister Anas Al-Saleh was quoted by the Kuwait News Agency (KUNA) as saying that the draft agreement provides that each GCC state will be allowed to introduce their own VAT regimes, providing that common principles are adopted by all GCC members –  Bahrain, Kuwait, Oman, Qatar, Saudi Arabia, and the United Arab Emirates (UAE).

Countries in the Gulf are currently seeking ways to diversify their revenue sources to offset falling revenues from low oil prices, as recommended by the International Monetary Fund (IMF).

Earlier this month the IMF released a report reviewing the VAT regimes adopted by countries in the Middle East and North Africa (MENA) region. The report noted that standard VAT rates have increased in all MENA countries, as have the number of rates levied (except in Algeria). As of 2013, the most recent year covered by the study, VAT rates in MENA countries ranged from five percent to 20 percent. It said the recent decline in oil prices and revenues is a reminder that even resource-rich GCC countries need to lay the basis of a tax system for the future.

A pan-GCC VAT has been discussed for more than a decade, but negotiations have stalled in recent years. It is anticipated that a GCC VAT would feature either a three or five percent headline rate.

TAGS: United Arab Emirates | Finance | VAT rates | tax | economics | value added tax (VAT) | Kuwait | Saudi Arabia | fiscal policy | revenue guidance | law | International Monetary Fund (IMF) | Algeria | Bahrain | Qatar | tax reform | regulation | Gulf Cooperation Council | Oman | Africa | Middle East

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