Businesses should ready themselves for the arrival of value-added tax (VAT) in the Gulf countries, warns a major consultancy.
Although governments have not yet confirmed the new tax, officials in Saudi Arabia, Oman and the UAE have suggested it will be implemented within two years, prompting Deloitte to comment that “it seems only a matter of timing rather than ‘if’ VAT will come”.
“VAT is simple conceptually but in practice very complex,” said Justin Whitehouse, one of Deloitte’s indirect tax specialists in the region, who spoke at seminars attended by 280 business people in Dubai and Abu Dhabi.
He added: “VAT implementation will be a major business issue and businesses would be well advised to consider the impact it may have on short to medium term business plans.”
With their large oil reserves and relatively small populations, Gulf states have generally been able to avoid imposing taxing their populations. However, increased pressure on state resources and the recent decline in oil prices has forced governments to look at new funding sources.
Christine Lagarde, managing director of the International Monetary Fund, recently told finance ministers at a forum in Abu Dhabi that the Gulf countries should implement VAT and consider placing “greater emphasis” on other forms of tax such as corporate tax, property tax and excise duties.
Tax powers are “the lifeblood of modern states”, she said.
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