Saudi Value Added Tax (VAT): After huge expenses related to military activities coupled with a dip in the price of oil in the global market, Gulf Cooperation Council (GCC) made the decision to impose VAT.
In a decision to implement a radical shift in their policies, for the first time, 6 states in the Gulf decide to tax their citizens.
GCC is considered as a federation, albeit a loose one, that includes Bahrain, Kuwait, Oman, Qatar, Saudi Arabia and the United Arab Emirates.
According to the report in The Times, global investment funds which amounted to tens of billions in dollars have been withdrawn by Saudi Arabia in an effort to reduce its budget deficit.
“VAT will be introduced gradually and be completed within two years, which is the time set for application in GCC (Gulf Cooperation Council) countries in 2018. It will be around 5 percent, which is the lowest worldwide,” Alassaf was quoted as saying.
In spite of this, the Kingdom still supported a foreign policy which goes for an aggressive to support the anti-government Syrian troops in an 8-month military campaign to fight Yemen’s rebels which is backed by Iran.
The price for oil barrels dipped to its lowest point at $40 this week. This has been the cheapest price since the onset of this financial crisis.
With hopes to move the dependence of the population as well as the economy on gas and oil, Gulf states considered taxation which is an alternate income source.
Based on the council’s agreement, VAT will be imposed over the next 3 years although exclusions will apply on social services, healthcare, education as well as 94 food items.
To decrease competitiveness and smuggling, the Gulf states plan to introduce VAT simultaneously.