Gulf States Continue Dialogue On Value-Added Tax – UAE Official

Gulf states are pursuing discussions on plans to introduce value-added tax (VAT) in the oil-rich region, with a meeting scheduled later this month aimed at resolving points of contention, an United Arab Emirates finance official said.

The six nations of the Gulf Cooperation Council (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.

However, the sharp recent reduction in oil prices could lend 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.

“The committee has met many times but we haven’t concluded anything yet,” Younis Hajj al-Khoori, under-secretary at the UAE ministry of finance, told reporters on the sidelines of a media event on Sunday.

The committee is meeting again this month to try to sort out matters, he said, adding with the main sticking points related to imposing VAT on certain goods and services.

Some countries do not want the levy on food, for example, and others want to exclude healthcare.

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

A levy of between three per cent and five per cent has been proposed by the committee but Khoori said 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.

A proposed corporate tax for companies in the UAE is still under study, Khoori said, declining to elaborate.