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GCC VAT Could Arrive In Four Years

by Lorys Charalambous,, Cyprus

29 November 2012

Value-added tax (VAT) could be implemented in the Gulf Cooperation Council (GCC) states within two to four years, according to a new report.

The report, "Paying Taxes 2013", by accountancy firm PwC, the International Finance Corporation and the World Bank notes that governments in the Middle East will face the challenge of how to raise additional tax revenues in the future. In particular, increased spending requirements and populations demanding greater economic rights will create pressure to either introduce new taxes, expand the tax base, or hike tax rates.

"The question and the challenge will be whether the Middle East countries will be able to remain easy places to pay tax," notes the report. "With a slowing world economy and the potential for stagnating oil prices, governments in both oil and non-oil rich countries will have a need to increase tax revenues in order to balance their budgets, and at the same time still provide an attractive business environment for investors."

The report points to continuing efforts by GCC countries to introduce a VAT system, with a target to do so within the next two to four years. According to the report, this includes an intention to harmonize the planned VAT laws by adopting a VAT framework law. This law would be adopted by all GCC countries, similar to the existing GCC Customs Union law.

A pan-GCC VAT, receipts from which would offset the loss of customs revenues arising out of the removal of internal customs duties, has been discussed for many years, but there remain many technical obstacles to overcome, and some member states are more ready than others to implement the tax.

In 2011, a timeframe of 2012 to 2015 was tentatively proposed for the imposition of VAT, but there is currently no consensus on an implementation date.

The GCC comprises Kuwait, Bahrain, Saudi Arabia, Qatar, the UAE and Oman.

TAGS: tax | business | value added tax (VAT) | Kuwait | Saudi Arabia | law | Bahrain | Qatar | Gulf Cooperation Council | Dubai | Oman

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