The UAE confirms that Gulf States are contemplating on value-added tax (VAT)

The Gulf region is currently conversing on implementing VAT on regions, which are rich in oil. According to sources, a meeting will be held in order to further discuss the matter later on during this month.

The six states part of the Gulf Cooperation Council (GCC) has been considering implementing VAT ever since 2007 in order to increase profits. All discussions and negotiations concerning the implementation of VAT have been conducted in the presence of all six Gulf States in order to prevent one state from excluded from competition.

Due to the plunging of oil prices, the Gulf nations are considering the introduction of VAT now more than ever before. This is because it is anticipated the six Gulf States will mark a budget deficit during the 2015 financial year and are not willing to cut off state spending on neither infrastructure nor social expenditure, which aim to enhance their economic status and as such improve the lives and lifestyle of the people.

Although the GCC has held several meetings, nothing has been decided yet. The GCC has arranged another meeting during February in order to further discuss the matter. The GCC is contemplating on introducing VAT on specific services and goods. No decision has been officially made, as some states do not want VAT to be imposed on food products whereas others do not agree on imposing VAT on healthcare.

The six countries part of the GCC includes the UAE, Qatar, Kuwait, Saudi Arabia, Oman and Bahrain. The GCC has suggested setting the VAT rate between 3%-5%, although it has not been made official.

IMF has long supported the idea of GCC implementing a levy in order to make sure governments will receive profits no matter the instability of oil prices. Furthermore, the UAE will possibly introduce a corporate tax, but again nothing has been made concrete.