Consultants EY see 'increasing level of concern' about lack of official guidance from gov'ts
Half of GCC-based companies have not started to prepare for the launch of 5 percent value added tax in the region next year, according to a survey conducted by global consultants EY.
Only 11 percent of businesses said they have evaluated the changes that are needed to their financial, operational and information technology processes ahead of the introduction of VAT in January 2018.
The survey revealed that 50 percent had not started preparations while 29 percent said they had studied some of the new VAT provisions.
EY highlighted in a statement that there was "an increasing level of concern" that the lack of official guidance from governments in the region is "posing an increasing risk".
"Clearly, for many businesses in the GCC region the time to get started is now. Although communication about the timeline for VAT implementation and details of the framework has been delayed, January 2018 is the stated target date," EY said.
It added: "Any further delays in issuing country-specific VAT laws should not prevent companies from preparing for VAT in the GCC region."
EY said companies need to be aware of the costs associated with the business changes required to successfully incorporate VAT into all their processes and make sure sufficient funding is budgeted for this purpose.
"Well-planned and effective change management will be critical to a company’s success in implementing VAT. Companies need to be concerned not just with their own readiness, but also that of suppliers and other external agencies — VAT is collected all along the supply chain and a failure along that chain will impact others," it added.
For many people who work and do business in the GCC region, VAT will be a new concept — a tax on consumption, not a sales tax, and it is critical that this is understood, EY said.
Last month, Fitch Ratings warned the plan to introduce VAT in the Gulf region could create operational risks for companies and put pressure on profits and cash flows in some industries as markets adjust.
The ratings agency said that collecting and remitting VAT to the government will have notable set-up and compliance costs.
It added that businesses with VAT-exempt goods and highly competitive sectors could find themselves, rather than customers, taking on this additional cost.