VAT stirs emotions in GCC countries


GCC introduced Value Added Tax on January 1, 2018 and everyone is not exactly jumping for joy

Sanjana Udiaver

Bangalore, January 18, 2018: Kuwait is all set to implement Value-Added Tax this year, but the citizens are not really sure they want it.

Most people in Gulf Cooperation Council (GCC) countries have paid little or no tax so far. But, now, the Council has decided to introduce VAT.

The representatives of the Member States of the GCC have confirmed the introduction of VAT system by signing a VAT Framework Treaty.

Radhakrishnan Nair, General Manager at Areej International Foodstuff and a local resident of Kuwait, said “The taxation system is unlikely to function in Kuwait since the local population has never been taxed before, it is not something that would be easily accepted.”

They know only direct spending and earning, they do not know how taxation works, he said. Since it’s a monarchy, the system of governance is not very transparent and if tax came into play then they would have to be more transparent, he added.

Alok Chugh, Government and Public sector Leader, Middle East, and North African (MENA) region at Ernst & Young, said in an interview, “the VAT law is expected to be implemented by January 2018. Accordingly, businesses have only 10 months to prepare for VAT implementation and ensure the contracts have been amended to that effect and the IT systems are updated to ensure compliance with the laws.”

After its implementation, the VAT levied on goods and services will by five per cent which is considerably lower than the VAT charged in Organisation for Economic Co-operation and Development  (OECD) countries, which is at 19 per cent.

Lekha Kishore, consultant in sales and marketing and a local resident of Dubai said the people in Dubai are aware of the taxation system as they pay road tax, so this is just an addition to what they are already paying.

Muna Al Funzai, a journalist from Kuwait Times said, “VAT will be a matter of concern for business people and will possibly have an impact on the business environment and investments when implemented.”

“VAT is a transparent method for GCC governments to increase their revenue, boost their GDP and maintain their strong economies while continuing to deliver public service,” she added.

Staple food items have been exempted from the VAT, but electronics, automobiles, jewelry, and restaurants are among those that will be taxed.

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