VAT plan for GCC oil firms at technical stage
Abu Dhabi, September 9, 2011
Plans to introduce a value-added tax (VAT) for the GCC oil exporters remain at a technical stage with the timing of the long-considered project still undecided though 2012-2015 have been tentatively discussed as potential launch dates, officials said.
Six Gulf Arab crude producers have been mulling the joint VAT plan over the past five years, aiming to trim their budget dependence on volatile oil prices, expand tools to steer hydrocarbon-reliant economies and reform their low-tax systems, said a report in our sister publication, the Gulf Daily News.
'It is only at the discussion stage,' UAE Finance Ministry Under-Secretary and director general Younis Al Khouri said on the sidelines of a meeting of GCC finance ministers in the UAE capital.
'There is no specific period defined but there is a grace period to be given to every state, so each will have a period of 2012-2015,' he added.
Besides the UAE, Saudi Arabia, Kuwait, Qatar, Oman and Bahrain are members of the GCC. The UAE and Oman have already withdrawn from a single currency plan.
'A number of countries need at least one to two years to be technically ready should the decision to introduce the VAT be made,' GCC Secretariat General international economic relations director general Abdel Aziz Abu Hamad Aluwaisheg said.
Oil is a major revenue source for most GCC crude producers, making their budgets vulnerable to price falls given the absence of taxation of individuals.
Khouri said no agreement had been reached yet on the VAT rate and the plan still needed analysis and preparation.
'The UAE is not ready. A lot of homework is required, it's not just a date,' he said.
The VAT rate considered at the technical level is five per cent, Aluwaisheg said, adding that would not cause large price pressures in the Gulf, which had been struggling to contain record, double digit inflation in the oil boom year of 2008.
'The goal is to generate budget revenue worth 2 to 3 per cent of GDP. That would be around 6 to 9 per cent of the budget,' he said, adding that there would be leeway for national variations in non-tradable sectors such as real estate. – TradeArabia News Service