In a surprising announcement, six Gulf states have declared that they will soon be taxing their citizens for the first time.
This sudden change in policy has been decided by the Gulf Cooperation Council (GCC), a federation composed of Bahrain, Kuwait, Oman, Qatar, Saudi Arabia, and the United Arab Emirates (UAE). In this new resolution, the states have agreed to introduce VAT as a solution to gather funding due to expensive military campaigns and the massive oil price drop in the market. Just this week, oil has dropped to the staggering amount of almost $40 per barrel. This is, by far, the lowest recorded figure since the financial crisis.
According to a report by The Times, Saudi Arabia has already pulled back tens of billions of dollars from global investment funds. This, of course, has been done as a way of reducing budget deficit problems.
Despite these financial struggles, however, it has not backed down in supporting anti-government troops in Syria and pursuing a military campaign against rebels in Yemen.
Taxation, therefore, is seen as the effective alternative income source for these Gulf states as they aim to strengthen their economies without depending so much on gas and oil.
GCC’s announcement comes with the information that value added tax (VAT) will be introduced within a three year period. There are, however, certain sectors and products that will be exempted from the planned VAT.
Younis Haji al-Khouri, undersecretary of the UAE Ministry of Finance, has been quoted saying “We agreed on key issues to apply zero tax on healthcare, education, social services sectors and exempt 94 food items.”
The introduction of VAT would be a huge reform in the economics of the six concerned countries. In the past, all of them have implemented minimal tax systems and no tax on income.