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Established in 2006 as a Community of Reality

Welcome to the Neno's Place!

Neno's Place Established in 2006 as a Community of Reality


Neno

I can be reached by phone or text 8am-7pm cst 972-768-9772 or, once joining the board I can be reached by a (PM) Private Message.

Established in 2006 as a Community of Reality

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Established in 2006 as a Community of Reality

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    What are the implications of VAT in Saudi Arabia and the UAE?

    Rocky
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    • Post n°1

    What are the implications of VAT in Saudi Arabia and the UAE? Empty What are the implications of VAT in Saudi Arabia and the UAE?

    Post by Rocky Tue 02 Jan 2018, 2:40 am

    What are the implications of VAT in Saudi Arabia and the UAE?







    Saudi Arabia and the United Arab Emirates (UAE) began yesterday to apply a value-added tax of 5% on a range of goods and services. Economists believe that taxes, regardless of their nature, will affect consumers' purchasing power.
    The Gulf states, the two largest economies in the Arab region, have only applied the GCC agreement to impose VAT on schedule.
    This comes at a time when Oman, Kuwait, Bahrain and Qatar apply value added tax to varying dates.
    VAT is an indirect tax paid by the consumer, and is imposed on the difference between the purchase price of the factory and the selling price of the consumer.
    The introduction of VAT is an attempt to strengthen and diversify non-oil financial revenues, as oil prices fall, the Gulf's main source of income.
    Budget deficit
    The imposition of taxes and the increase in fees and prices, regardless of their nature, will automatically affect the purchasing power of the consumer and savings rates, and will affect the volume of remittances for expatriates, as in the Gulf, says financial analyst Kamel Wazna.
    He added that if the UAE economy can withstand to some extent the consequences of taxation, his Saudi counterpart will be affected negatively at the moment because he is living in a recession that requires the introduction of incentive policies and not tax, according to the economic perspective.
    "Taxation in Saudi Arabia is something new that citizens have never done before, so it is an additional burden on them. However, he pointed out that the tax rates in the Gulf region remain the lowest at the global level.
    Wazna said the problem is not the imposition or rate of value added tax, but an indication of the possibility of imposing more taxes in light of the continued budget deficit, which is not used by consumers in the Gulf.
    For other Gulf states that have deferred the application of the tax, it has not ruled out that its decision should be linked to caution or fear that it will adversely affect their economies or lead to political repercussions.
    For his part, General Manager of Namaa Financial Consultancy Company Taha Abdul Ghani said that the introduction of the value added tax as well as the increase in fuel prices in Saudi Arabia will lead to a wave of high prices, which will affect both the citizen and the resident.
    He added that tax revenues will contribute to the Saudi budget and reduce the deficit, but it will affect the corresponding market demand and then levels of production, which will open the door to expectations of further contraction of the Saudi economy.
    Abdul Ghani believes that the postponement of the application of value added tax in the other four countries came on the back of fear that the crisis of the siege of Qatar to crack the Gulf House and then the end of the economic and tax decisions of the GCC countries.
    In the light of this, he wondered about the reasons that could lead to the application of value added tax or any other joint decisions, while three Gulf states - Saudi Arabia, UAE and Bahrain - are surrounded by Qatar.
    Saudi Arabia expects growth of 2.7% this year, after shrinking 0.5% last year.
    The most important tax-free goods and services in Saudi Arabia are remittances, which will be imposed on remittance fees, according to the Zakat and Income Tax Authority.
    Saudi Arabia has not exempted basic food commodities from the tax, while exempted government education and imposed on the private.
    In the UAE, the UAE Federal Tax Authority said the tax would include most goods, six telecommunications services and 10 e-services.
    According to official estimates, Saudi Arabia is expected to reap the proceeds of value added tax in the first year of implementation, amounting to 23 billion riyals ($ 6.1 billion). While the UAE Ministry of Finance expected the value added tax to generate revenues of between 10 and 12 billion dirhams this year (2.7 and 3.26 billion dollars).
    Ernst & Young expects Gulf states to generate revenues of more than $ 25 billion a year after the full implementation of VAT in all six GCC countries.





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