Qatar takes a self-defeating stance on VAT

Four Gulf States are expected to implement the valueadded tax (VAT) in about a month from now, after Oman’s Consultative Assembly approved the VAT law at the end of last the week. But the VAT bill is still under debate in the Kuwaiti National Assembly, while Qatar has announced that it will not implement VAT despite signing the GCC agreement.

Qatar’s attitude in this respect is no different from what it has adopted in the past, which led to a disruption in implementing some common GCC agreements. This time the VAT and Concise Tax agreements have no collective character as the application is basically related to the financial and tax reforms conducted in each country, despite the fact the reform decisions were taken collectively to harmonise the GCC’s markets.

The VAT will have significant outcomes that would result in greater stability in the Gulf’s economic conditions, including stabilisation of state budgets. Europe’s experiences with VAT have proven its importance as an effective financial instrument, without which these economies could collapse even though they are developed and diverse.

Childish obstinacy

The problem with Qatar, which has announced that it will not apply VAT, comes, first, from childish obstinacy. Secondly, it tries to take advantage of the emotions of people, saying it does not want to place further burdens on consumers — even though it had previously approved the agreement.

However, Qatar’s rejection has nothing to do with such burdens given that the tax rate is relatively low (5 per cent compared to 15-20 per cent in Europe), ignoring the fact the tax has future prospects, and needed for preparing financial conditions in the post-oil era.

In fact, the Qatari regime instead tries to put up roadblocks to hinder the application of VAT, without knowing its failure to apply VAT will have no effect on the four countries that have passed the tax law (the UAE, Saudi Arabia, Bahrain and Oman).

Financial gap

The gap between the financial systems of these countries and Qatar will increase, and Qatar will lag in enacting financial reforms. And sooner or later, it will have to recognise its underdeveloped financial and tax systems compared to other Gulf countries.

Qatar’s obstinacy in this regard mirrors a lack of understanding of the importance of some procedures and laws. There is a difference between being different from other parties and the fact that you are poking your own eyes out by taking positions against your interests and economic future only to irritate others. Or even attempt to sabotage their projects to no avail.

It goes without saying that the application of VAT is in the national interest with positive future prospects, while the excise tax aims to protect public health and reduce damages, especially on the younger generations in the Gulf states.

So, if there is a positive result from Qatar’s decision to not apply VAT, it would be to bypass the GCC States and the requirement of unanimity contained in the Statute. The former secretary-general of the GCC states, Abdullah Beshara, said at the Abu Dhabi Strategic Forum last week that it needs some amendments after 40 years of the application of its clauses.

At the end of the day, the four countries, which approved the VAT and excise tax, will move forward to take their economies and financial systems to new heights, ignoring those who stay put in a world that is rapidly evolving and changing.