As experts predict multiple waves of the Covid-19 virus for the next 18 to 24 months, economic recovery may be farther than originally anticipated. Corporations, as well as countries, are likely to innovate ways they conduct business and manage finances in order to survive. GCC countries, who rely heavily on the oil business have seen a radical fall in the oil price along with a radical decrease in the global oil demand, and hence a substantial decrease in the revenue. Amidst these circumstances, immediate economic reforms are required to maintain fiscal stability, and implementing a stricter taxation regime is likely to be on cards for GCC countries.
Think Tanks of Big4 Middle East sees no option for the UAE and other GCC countries but to introduce new taxes. At the same time, however, governments need to be careful not to roll out taxes in a hurry, as it might cause panic in an already struggling economic environment. The right strategy for these governments would be to plan ahead for a period of 10 to 20 years. Start with corporation and property tax, and slowly bring income tax into play. Some jurisdictions that already have VAT may also see an increase in the percentage.
Back in 2017, the International Monetary Fund (IMF) also advised the GCC countries to consider income and other taxes. Today, the need for the same has only increased manifold. It is estimated that real estate taxes may be worth more than 1 to 2% of the GDP of GCC countries. Similarly, expanding the tax base for income and dividend distribution may provide much needed financial support to these countries.
While a more aggressive taxation regime is seen to be the most sustainable long-term option for the GCC countries, governments will need to consider the economic as well as the political impact of such a decision in order to make it sustainable.
Disclaimer: Content posted is for informational & knowledge sharing purposes only, and is not intended to be a substitute for professional advice related to tax, finance or accounting. The view/interpretation of the publisher is based on the available Law, guidelines and information. Each reader should take due professional care before you act after reading the contents of that article/post. No warranty whatsoever is made that any of the articles are accurate and is not intended to provide, and should not be relied on for tax or accounting advice.
You can access Law including Guidelines, Cabinet & FTA Decisions, Public Clarifications, Forms, Business Bulletins for all taxes (Vat, Excise, Customs, Corporate Tax, Transfer Pricing) for all GCC Countries in the Law Section of GCC FinTax.