By Staff writer
Officials said to have agreed to formulate a general framework for the introduction of value added tax
Gulf officials have agreed to formulate a general framework for the introduction of value added tax, better known as VAT, in the region.
Under-Secretaries of the Ministries of Economy and Finance of countries in the Gulf Cooperation Council agreed the deal at their 46th meeting in Doha, news agency WAM reported, citing Kuwaiti News Agency.
It quoted the Under-Secretary of Kuwait's Finance Ministry, Khalifa Hamada as saying that a legal team has been assigned to finish the framework which is to be submitted at a meeting of the GCC Ministers of Finance and Economy in May.
He added that the meeting called for finishing all requirements for the establishment of the Customs Union by the end of this year.
The Kuwaiti official underlined the significance of eliminating all barriers to facilitate movement of commodities between GCC countries and increase trade.
The six nations of the GCC 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 sharp recent 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.
A levy of between 3 percent and 5 percent has been proposed but a figure has not been finalised.
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.
Finding it difficult to analyze what is happening. No one is against having a flourishing and stable economy, but when salaries are stagnant and the people are struggling terribly to manage the expenses, how is anyone going to be able to survive long term?
At the end will it be all about "Can't afford it? Then go back home!"
GCC economies will benifit from introducing VAT on multiple levels, not only financially. They would be able to measure the activity of the economy in a more detailed approach through creating tax authorities.
Few questions about it,
The cost of building the infrastructure of VAT will justify its implementation?
They are planning to remove all the hidden taxes and payments in each stage of doing anything in UAE?, i.e. stamps, paper work, fees, and so on.
Was it decided how the money collected will be used?
Did somebody analize the impact of VAT in Purchasing Power of the people and the cascade effect that this step will produce with the people decision to work in UAE free tax country?
I suppose that will be more questions about it, but my feeling is that this measurement will have negative impact in UAE economy rather than value add somehow.
@Steve...VAT does not go into the 'coffers' of the govt. VAT is a sure sign that DXB is/has/intends to borrow money from the IMF. VAT is the debt service mechanism/vehicle for repaying borrowed money from the IMF.
Same with Income Taxes in Europe/USA. Not a penny goes to the govt. It is ALL paid to the respective Inland Revenues who are Tax collectors to the International Banks. No tax office, UK or Europe is govt owned. Like the US FED and Bank of England...they are ALL privately owned institutuions.
Income tax is used to pay down the debt from govt borrowing. This is all in the public domain and quite fascinating when your start to read more into it.
One big issue that is being overlooked here is that in the Western countries that are quoted as places where VAT is implemented the people paying the tax ie the consumer has some say via the democratic process on how their money is spent by the government. I highly doubt such a process will be implemented in the GCC as a whole so is it fair to take a tax without giving the tax payer any say in what happens to the money collected?
"No taxation without representation."
"The sharp recent 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."
Since the introduction of VAT would have residents contributing to the development of the economy and improvement of the citizens' lives, it would be justifiable if there is a fair path to citizenship for residents as well as a representative government for everyone. Otherwise, it's hard to reconcile.
Quite rightly, you find it difficult. Go to Europe, in particular the EU countries, where you have completely "independent" VAT percentages added. If you then go e.g. to Germany, you will find special taxes for sugar, for coffee, for beer, plus an "eco tax" on fuel. So far so good, but Germany charges VAT even on these taxes - which is unconstitutional. But they all pay it... And the Germans are doing it even more crazy: they charge reduced VAT of 7% on food, cut flowers, newspapers, public transport, and - yes! - on canned dog food, but not on canned cat food! But on the much more important nappies ("children are the future") and prescription medicines, they charge the full 19% VAT. See the difficulty to analyse!?
I'll bet that the rumoured 3 or 5% for the GCC will only be the starter!
That would be true if what is being introduced in Income Tax, as opposed to VAT.