GCC-wide VAT accords ratified
The agreements for the Gulf Cooperation Council (GCC)-wide value added tax (VAT), set to be introduced on January 1 next year have come into force now that the UAE has become the second country to endorse the accords.
Saudi Arabia’s cabinet had approved the agreements to levy a 5 per cent VAT and an unspecified excise tax in January, which herald the introduction of consumption taxes in the Arabian Gulf region for the first time.
The GCC general secretariat said yesterday it had received the UAE’s ratification of the agreements, triggering their coming into force.
Saudi Arabia was supposed to start levying an excise tax on soft drinks, energy drinks and tobacco in April but postponed its decision.
All six GCC states are introducing taxes, trimming expenditures and undertaking other reforms to cope with the low oil price.
The GCC tax plans are in line with recommendations by the IMF, which has urged the countries to create new revenue streams and diversify their economies away from oil amid a slump in prices since the summer peaks of 2014.
The GCC nations may be able to boost GDP by about 1.5 per cent with the implementation of the 5 per cent VAT, the IMF has said.
In the UAE, VAT could generate Dh12 billion in its first year and Dh20bn in its second year, according to Sultan Al Mansouri, the Minister of Economy.
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Published: May 23, 2017 04:00 AM