Gulf Nations Have Room to Raise Tax Revenue, IMF Staff Say

  • After VAT and excise taxes, GCC should tax business profit
  • GCC taxes should be imposed gradually to help people adjust

Gulf Arab monarchies that saw their oil revenue slump have “considerable scope” to boost tax income from other industries, according to a paper prepared by International Monetary Fund staff.

Governments of the six-member Gulf Cooperation Council, which are working to implement value-added taxes and levies on tobacco as well as sugary drinks, should later “introduce or expand the tax on business profits,” the paper said.

“This, together with the VAT and excises will help ensure efficient and progressive tax systems in the region and generate the bulk of non-oil tax revenues for most countries’ budgets,” it said.

The plunge in oil prices has battered the public finances of the bloc, which includes Saudi Arabia, prompting governments to slash spending on projects and curtail generous state largess.

Tax measures should be introduced gradually to allow businesses and individuals time to adjust, the IMF paper said. A “successful implementation of VAT and excise taxes’’ should be a priority.

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