Next GCC income tax in ’23?
After oman’s move for 2022, bahrain and kuwait could follow suit
dubai — Bahrain and Kuwait could be the next GCC countries to introduce income tax after Oman in the oil-rich region as low crude prices and the coronavirus pandemic take a toll on government revenues, say tax experts.
They believe that the next Gulf country could announce imposing an income tax from 2023 onwards on high net worth individuals, ranging between five to 15 per cent.
On November 2, Reuters reported, quoting Oman’s finance ministry, that the sultanate is expected to introduce an income tax on high earners in 2022 to bring its fiscal deficit down.
Currently, the UAE, Saudi Arabia and Bahrain have excise and valueadded taxes; Oman plans to introduce VAT from April 2021. Some regional countries also levy corporate taxes on oil companies.
Anurag Chaturvedi, managing partner at Chartered House Tax Consultancy, said Bahrain and Kuwait are scrambling to boost state revenue that got hit by the pandemic and low
Globally, countries levy tax to provide better life in the form of infrastructure, security, health, education and avenue for economic benefit
Anurag Chaturvedi, managing partner at Chartered House Tax Con
If income tax is ever introduced, the rate of tax would not be too high just like VAT and it could be anywhere in the range of 10-15%
Nimish Goel, partner at WTS Dhruva Consultants
crude prices; they may introduce income tax for high net worth expats considering a significant decline in fiscal revenue this year and an increasing fiscal deficit year-on-year.
Bahrain recorded a 29 per cent decline in revenues in the first half of 2020 compared to the same period last year, whereas Kuwait’s fell by over 16 per cent for the financial year ending 2020. Earlier this year, Saudi Arabia had discussions on the proposal to tax expats’ income, but no decision has been made so far.
Chaturvedi said globally, countries levy tax to provide better life in the form of infrastructure, security, health, education and avenue for economic benefit. “On the similar lines, the GCC may also introduce income tax against the social spend on state infrastructure.”
Nimish Goel, partner at WTS Dhruva Consultants, suggested Bahrain could announce a tax on the income of companies rather than taxing the income of individuals.
He said a reduction in oil global demand, recommendations of the International Monetary Fund to include income tax to broaden revenue sources, low rates of corporate income tax and a disparity in income levels are some of the factors that can prompt regional governments to levy a new tax.
Financial stability
“The introduction of corporate income tax should bring stability and more foreign investment in the region,” he said.
Some tax experts had earlier said that wealth tax, property tax, excise tax on fast food, gaming and rating, and tax on distribution of income such as profits and dividends are on the agenda of some regional governments.
Goel said since Oman has given a window of approximately one year, it may be expected that other GCC nations shall continue to announce the introduction of income taxes thereafter.
The rates of ncome tax, according to Goel, depend on various factors such as progressive rates, demographic composition and social security benefits, among others.
“If income tax is ever introduced, the rate of tax would not be too high just like VAT and it could be anywhere in the range of 10 per cent to 15 per cent.”
Chaturvedi noted that if weaker economic activity continues in 2021, resulting in further widening of the deficit gap, regional governments can take some decision to levy income tax from 2023 with a rate between five to 10 per cent on annual net income.