The implementation of VAT in Kuwait, Qatar, Oman and the Kingdom of Bahrain requires more time, said Deputy Director of International Monetary Fund Abdulhak Sanhaji.
Sanhaji pointed out that the four Gulf countries are expected to be technically ready to implement this tax within 18 months.
"The IMF is working with the four countries that are expected to implement the tax as part of a broad GCC agreement," Sanhaji told The National. "The Gulf countries are not currently ready to apply VAT because they need the technical side, The political debate is still going on on this subject.
The Gulf states are putting tax regulations in place to help reduce fiscal deficits, which have increased since 2015 due to the sharp drop in oil prices since mid-2014 and the drop in the barrel from $ 115 to less than $ 30 in early 2016.
Saudi Arabia and the UAE led the tax reforms with their introduction of value added tax earlier this year, as well as indirect taxes on energy drinks, soft drinks and cigarettes last year, while Bahrain began to apply indirect taxes in December.
Sanhaji said that there is political resistance in some Gulf countries regarding the idea of applying VAT, and that it is not technically prepared to implement this tax.
According to Reuters, the application of value added tax was suspended in Bahrain until the approval of the joint committee between the Council of Ministers and the Parliament on the new rules for the distribution of aid to low-income earners.
The International Monetary Fund (IMF) expects the application of value added to the region to generate new returns ranging from 1.5 to 3 percent of non-oil GDP.
According to Oxford Economics, this tax will contribute to raising inflation to 4 percent in Saudi Arabia and the UAE, but it will have a slight impact on GDP growth.
The Kingdom of Saudi Arabia has approved a series of allowances for employees of the government sector, military personnel, retirees and students, as well as beneficiaries of social services, for a period of one year from January to help mitigate the effects of VAT and increases in energy prices .
Sanhaji pointed out that the effects of applying the tax will be transitional. When the VAT is applied, we will naturally find that prices are going up but over time they will go down, indicating that the implementation of the tax will have a slight impact on GDP , And will not have a significant negative impact on growth.
On the other hand, Central Bank of Bahrain Governor Rashid Mohammed Al-Maraj said that his country's economic growth may accelerate due to the recovery of oil prices since mid-2017, but warned that the government should be cautious about the budget deficit. It is only a matter of time before Bahrain begins to work with value added tax to strengthen state revenues.
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