It was Stoinis' first IPL century and his second in T20 cricket
The additional reforms also include taxes on remittances, taxes on income and wages paid to foreign workers and taxes on financial transactions, the IMF staff report prepared following the October meeting of GCC finance ministers and central bank governors in Riyadh revealed.
"Over time, the GCC countries, which have intensified their efforts to diversify budget revenues as part of their broader fiscal consolidation strategies, should also move to introduce or expand the tax on business profits. This, together with the VAT and excises will help ensure efficient and progressive tax systems in the region and generate the bulk of non-oil tax revenues for most countries' budgets," said the report titled 'Diversifying government revenues in the GCC: Next steps'.
Like VAT, the business profit tax should start simple and be levied at a single (relatively) low rate for all businesses, argued the IMF paper, which discusses how to diversify government revenues in the GCC in the face of the sharp decline in oil revenues and the emergence of large fiscal deficits.
"This rate could be in the range of 10 to 15 per cent [with allowance for the deduction of Zakat payment for businesses paying Zakat], a relatively low rate when compared globally. A rate lower than 10 to 15 per cent range is likely to yield too little revenue and may not be cost-effective, while a rate higher than this range may make the GCC economies relatively less attractive as a business domicile.
Eliminating other taxes
"One option could be to set the rate at the higher end of the 10 to 15 per cent range and at the same time eliminate other levies that are imposed on business profits, except Zakat, thus further streamlining the tax system. The new business profit tax should apply to the profits of both foreign- and GCC-owned corporates and individual businesses," said the IMF paper.
The authors observed that new tax could generate substantial revenues. "If, for example, we assume a 15 per cent rate, this could generate a business profit tax revenue of about three per cent of GDP on average for the GCC countries. However, the net revenue yield will likely be smaller, given that the GCC countries are already collecting some profit tax revenue from foreign companies and individuals."
The revenue from the new tax will likely vary across countries in the GCC, they noted. It is expected to be higher in Bahrain, Oman, the UAE and Saudi Arabia, and somewhat lower in Qatar and Kuwait where the hydrocarbon sector has a larger share in GDP. The revenue yield will also be affected by existing exemptions and deductions and will also depend on the effectiveness of the tax administration.
The IMF staff, however, said tax reforms would take time to implement as the institutional capacity needs to be developed. "It is important that tax reforms are implemented at a pace that allows businesses and individuals time to adjust and that is also consistent with administrative capacity."
"Experience from other countries shows that it takes time to build tax administrations or revenue agencies and to develop relationships with taxpayers that encourage self-compliance. This is why the reform process should be started as early as possible. Such efforts will require communication strategies at the national and regional levels to explain why taxation is needed with the aim to overcome any scepticism about the usefulness of establishing taxation systems in oil-rich countries," the IMF report said.
However, the first priority for the GCC countries should be to successfully implement the planned VAT and excise taxes. While there are benefits to countries moving together in introducing these taxes, there is also scope to move separately or with a sub-set of countries given differing fiscal needs and status of preparations, it said.
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