'Gulf must impose taxes to strengthen fiscal positions'

Dubai: Gulf countries should start levying taxes to strengthen their fiscal positions in view of the current low oil prices which are expected to slowdown their economies, according to a global organisation for Chartered Accountants.

There is a pressing need to raise taxes in Gulf Cooperation Council (GCC) countries in order to diversify revenues and strengthen their fiscal positions, said speakers at a panel discussion by Institute of Chartered Accountants in England and Wales (ICAEW)' Corporate Finance Faculty here yesterday.

Panelists included Jeanine Daou, Partner and Head of Indirect Taxes at PwC, Gary Dugan, MD of Global Wealth, CIO and Head of Investment Strategy at NBAD, Trevor McFarlane, CEO of Emerging Markets Intelligence and Research, and Ashok Hariharan, Partner and Regional Head of Tax MESA at KPMG and Sanjay Vig, MD at Alpen Capital and Chair of ICAEW's Corporate Finance Faculty network in the Middle East.

Panelists agreed that the lower oil price is not a disaster for GCC counties as they have more than USD 2.5 trillion in reserves and very low percentages of debt. However, for long-term economic sustainability, GCC countries must continue and accelerate diversifying their revenues.

Panelists agreed that imposing tax is the best solution for GCC countries to broaden revenues as other approaches, such as cutting subsidies or spending will be difficult to implement at this stage.

"There is growing international focus on taxation. Countries are looking for more information on multinational companies which are shifting their profits to countries with lower tax rates. Now is therefore a perfect time for GCC countries to start levying taxes," Michael Armstrong, FCA and ICAEW Regional Director for the Middle East, Africa and South Asia said.

Speakers said GCC countries have been discussing a common tax framework for the past 10 years, which is now reaching its final stage. Value Added Tax is a viable option and some form is expected to be introduced in the near future.

GCC, established in Saudia Arabia in 1981, is a political and economic alliance of six Middle Eastern countries which include Saudi Arabia, Kuwait, the UAE, Qatar, Bahrain and Oman.