The Pak Banker - - BUSINESS -

A num­ber of gov­ern­ments in the Mid­dle East and North Africa (MENA) re­gion have un­der­taken var­i­ous forms of sub­sidy re­forms to boost gov­ern­ment fi­nances in the con­text of sharp de­cline in oil prices and sub­se­quent con­trac­tion on gov­ern­ment rev­enues. Ac­cord­ing to an­a­lysts, the in­tro­duc­tion of an ef­fi­cient tax regime and some amount of spend­ing re­trench­ment could be the next step in fis­cal re­forms across the re­gion.

To pre­serve eco­nomic and so­cial sta­bil­ity and con­tinue with de­vel­op­ment plans, Mena gov­ern­ments are con­sider- ing tax mea­sures to broaden their rev­enue base and in­crease tax yields, ac­cord­ing to ex­perts from con­sult­ing firm EY [for­merly Ernst & Young].

"Fis­cal pol­icy ini­tia­tives are now fo­cus­ing on ways to broaden the rev­enue base, pro­mote in­vest­ment in projects that cre­ate value-ad­di­tion to ex­ist­ing oil and gas ex­port projects and stim­u­late in­vest­ment in the non-oil and gas sec­tor. Most of the coun­tries in the re­gion have em­barked on large-scale in­fra­struc­ture de­vel­op­ment projects, in­clud­ing rail, sea­ports, elec­tric­ity and wa­ter gen­er­a­tion and im­prove­ments to trans­port net­works and in­dus­trial fa­cil­i­ties," said Sharif Al Ki­lany, Mena Tax Leader, EY.

Gov­ern­ments have recog­nised the im­por­tance of tax pol­icy as a con­duit to in­cen­tivis­ing multi­na­tional com­pa­nies to es­tab­lish in the re­gion.

"The im­pact of fall­ing oil prices and the ex­pected new norm of oil prices at lower lev­els is cre­at­ing chal­lenges for coun­tries that are com­mit­ted to large cap­i­tal ex­pen­di­ture pro­grammes. Coun­tries in the re­gion have re­ported bud­get deficits due to lower oil and gas rev­enues and have recog­nised the need to fur­ther broaden their rev­enue take from tax­a­tion and are now fo­cused on in­tro­duc­ing in­di­rect tax­a­tion regimes," said Asim Shaikh, EY Mena Busi­ness Tax Ser­vices Leader.

Value added tax (VAT) is be­ing ac­tively con­sid­ered in many GCC coun­tries and Egypt. The UAE has re­cently said the coun­try is work­ing on draft of the cor­po­rate tax law and the val­ueadded tax law has been dis­cussed with the lo­cal and fed­eral gov­ern­ments. GCC coun­tries have been work­ing to­wards the in­tro­duc­tion of a com­mon VAT sys­tem for a long time. Many an­a­lysts say the process could gain mo­men­tum in the con­text to de­te­ri­o­ra­tion of fis­cal bal­ances and grow­ing deficits as a re­sult of sharp de­cline in oil rev­enues.

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