Dubai – Mubasher: Coordination is currently underway in GCC countries regarding the sectors that will be subject to the value-added tax (VAT), a UAE official said on Thursday, adding that this step aims to boost GCC revenues.
The six GCC countries agreed in Doha in May to continue working towards a VAT system in the region in a step that aims to boost revenues following the sharp decline in oil prices.
A general agreement has been reached; however, a decision as to the details and sectors subject to the VAT is still underway, UAE ministry of finance undersecretary Younis Haji Al Khouri told Mubasher.
Known as the sales tax, the VAT will be a major economic reform for the oil-rich GCC. It is also a one-of-its-kind step in countries whose citizens have become used to high levels of spending without taxes. The VAT is considered an indirect tax that is implemented on the difference between the cost price and the selling price of items.
No time frame has been set at this point, Al Khouri told Mubasher, adding that the recommendation is to implement a VAT of 3-5%.
The GCC has been considering the tax since 2004, but no step has been taken to implement it. However, the steep decline in oil prices has resulted in fiscal deficits in most of the GCC countries in the past few months.
This price fall has negatively affected the general budgets of the GCC, prompting their respective governments to examine new means to raise revenues.