'VAT will hit the wrong people,' says Mishal Kanoo

Prominent Dubai businessman, of Kanoo Group, argues there are already enough indirect taxes & only low-middle income residents would be hurt
By Courtney Trenwith
Thu 02 Apr 2015 09:43 AM

The value-added tax (VAT) being proposed by Gulf states would hit the wrong people, prominent Dubai businessman Mishal Kanoo has warned.

The deputy chairman of Kanoo Group, one of the longest running family businesses in the region, argued there were already “a hell of a lot of indirect taxes” and a VAT was unnecessary.

“The ones that would be hurt by taxes would be what you consider middle class, but the super-rich, a person worth a few billion… how is that going to hurt them?” Kanoo told Arabian Business.

He also does not advocate the introduction of an income-scaled tax system.

“How is that fairer that a person who has worked and gained gets taxed by an entity that has not? How does that work to the benefit of society?” Kanoo argued.

“The purpose of any taxation, theoretically, is to take the money and spend it on society or community needs. In most parts of the wold, [state department finances operate in the] negative … in our part of the world they’re positive, they’re making money. So what’s the purpose of giving the government more money?”

Gulf officials this week agreed to formulate a general framework for the introduction of a VAT across the region.

A levy of between 3 percent and 5 percent has been proposed but a figure has not been finalised.

The framework is due to be submitted at a meeting of the GCC Ministers of Finance and Economy in May.

The six Gulf Cooperation Council member states have been mulling the introduction of VAT since 2007 to broaden their revenue base, with negotiations happening jointly to avoid any one nation losing out in competition with others in the region.

The recent sharp reduction in oil prices is thought to have lent a further push to introduce the levy, given that most Gulf states are expected to record budget deficits in the coming fiscal year and are reluctant to pare back spending on infrastructure and social spending aimed at developing their economies and improving the lives of citizens.

Officials at the IMF have long urged GCC states to introduce the tax as a way of ensuring a reliable inflow of government revenues, safeguarding against volatility in oil prices.

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