Kuwait, Qatar, Bahrain and Oman will need more time than expected for implementing the GCC agreement to introduce Value Added Tax, even though Saudi Arabia and the United Arab Emirates have already implemented the tax”, says the Deputy Director of Financial Affairs Department at International Monetary Fund (IMF) Abdelhak Senhadji.
According to a report published in Gulf Business News, Senhadji said these countries should be technically ready in approximately 18 months to implement the tax but they may face problems in the political front. Lawmakers in Kuwait have been raising objections to the implementation of the tax system, and demanding the government to ensure the tax does not increase the financial burden of citizens.
The GCC agreement, which was signed in 2016, aims at introducing VAT in all GCC member states in order to help in dealing with the fiscal deficits that emerged since 2015 due to the fall in oil prices from above $100 per barrel in 2014 to less than $30 per barrel in 2016.
IMF expects VAT to generate revenues equivalent to 1.5 to 3 per cent of non-oil GDP and anticipates it to have low impact on inflation and GDP growth. According to Oxford Economics, the five per cent VAT will lift inflation by 2 to 4 per cent in Saudi Arabia and the United Arab Emirates, but will have little impact on the GDP growth, given the counter-measures taken by the authorities.(ArabTimes)