GCC eyes simultaneous VAT start

Target date for region is January 1 as UAE expects around $3.3b revenue in first year

Policymakers in the sixnation Gulf Cooperation Council (GCC) are aiming to introduce a 5 per cent value-added tax at the start of next year, despite administrative and technical obstacles, a senior UAE finance official said yesterday.

The GCC, its finances strained by low oil prices, has long planned to adopt the tax in 2018 as a way to increase nonoil revenues, but economists and officials in some countries have said privately that simultaneous introduction in all countries may not be feasible.

That is because of the complexity of creating the administrative infrastructure to collect the tax and the difficulty of training companies to comply with it.

However, Younis Al Khouri, under-secretary at the UAE finance ministry, said GCC governments were planning for early, simultaneous adoption.

“By 2018, January 1, we are aiming to adopt 5 per cent VAT across the GCC,” he said. Asked whether some sectors in the UAE might be exempt from the tax to reduce the drag on the economy, Al Khouri said the government was aiming for a 5 per cent rate across the board but parts of seven sectors — education, health care, renewable energy, water, space, transport and technology — might get special treatment.

“There might be areas ... but currently, as the Ministry of Finance, we are not aiming towards exemptions, which could create some leakages, some confusion.” Al Khouri said the government expected around Dh12 billion of revenue from the tax in its first year. That would be about 0.9 per cent of the UAE’s gross domestic product of $371 billion in 2015.