GCC states agree on key issues for VAT

Abu Dhabi - Introducing VAT would be a major economic reform in the GCC, which have minimal tax systems and no tax on income.

Gulf states have agreed on key issues for implementing value-added tax in the region, an official from the UAE Ministry of Finance said on Monday, moving the six nations closer to introducing direct taxation for the first time.
The agreement was reached at a meeting of representatives from Gulf ministries a few days ago, UAE Ministry of Finance Undersecretary Younis Haji Al Khoori told reporters on the sidelines of a media event.
Introducing VAT would be a major economic reform in the GCC, which have minimal tax systems and no tax on income.
Al Khoori said the target for introducing the tax was three years, and that it would take 18 to 24 months to implement once a final agreement has been reached.
"We agreed on key issues to apply zero tax on healthcare, education, social services sectors and exempt 94 food items," he said. In a couple of areas - including financial services - agreement was still lacking, he added.
To limit smuggling and damage to competitiveness, analysts say, Gulf countries should introduce VAT regionally rather than individually at different times.
The six states have been discussing the tax for years, but political and economic issues have delayed the project.
VAT cannot be implemented unilaterally but has to be part of a Gulf-wide decision, Al Khoori told Reuters in August, adding that if all GCC states agree on a deadline, then some could implement ahead of the others.
No indication of the rate at which VAT will be levied has been given by governments, although the International Monetary Fund has suggested the UAE consider imposing VAT at a five per cent rate.
Gulf Common Market report
Meanwhile, the UAE Ministy of Finance on Monday a Press conference to highlight the nation's performance in the Gulf Common Market, or GCM, at its headquarters in Abu Dhabi.
Al Khoori offered an overview of the GCM, including its establishment, developments, goals as well as UAE's performance with regards to the ten most prominent aspects of the market during 2014.
The report included a number of social, economic and education elements, in addition to the licence granted to practice economic, investment and service activities. It also included the total number of registered property contracts and investors in the stock market; the total number of Gulf commercial bank branches operating in the UAE; and GCC employees in the UAE public and private sector. The report also focused on the number of insurance policies extended to GCC, GCC students enrolled in public and private schools, and the beneficiaries of the social and health service within the UAE.
Obaid Humaid Al Tayer, UAE Minister of State for Financial Affairs, stressed that the GCC is moving towards achieving its ultimate objectives and more positive results.
"The sixth edition of the Ministry of Finance's report reveals the strong performance indicators of the economic integration between GCC countries, which reflects the achievements for the member states citizens in different fields, and the specialised authorities' commitment in the GCC countries to continue working to achieve more positive results for GCC nationals," he said.
Data from the report showed phenomenal growth in the number of licences granted to GCC nationals to practice economic activities, which amounted to 38,701 by the end of 2014, compared to 2013's 35,006. This is an increase of 3,695 from 2013 and a growth rate of 10.50 per cent. The number of licences granted has continually increased from 2000 to 2013, with 5,594 licences issued in 2000, representing an increase by 591.80 per cent up to 2014.
All GCC states posted increases in the number of licences granted. Saudi Arabia came in at No. 1 with 16,797 from 2013's 15,052, followed by Kuwait (7,141), Oman (6,487), Bahrain (5,706) and Qatar (2,570).
The UAE also continued to maintain its leading position in attracting GCC investors to own real estate, where the number of GCC citizens' ownership reached 18,032 in 2014, while total GCC real estate ownerships reached 90,295.
In share trading, joint-stock companies that allow GCC citizens to trade shares increased in 2014 to 80 companies, which represents 74 per cent of total companies registered with the Securities and Commodities Authority in UAE.
- With inputs from Reuters