(MENAFN- Arab Times) ICAEW members and guests gathered at The Oberoi in Dubai recently (Nov 4) to discuss how fiscal reform will affect businesses in the GCC countries. Panellists included Jeanine Daou, Partner and Head of Indirect Taxes at PwC; Gary Dugan, Managing Director € Global Wealth, CIO and Head of Investment Strategy at NBAD; Trevor McFarlane, Chief Executive Officer of Emerging Markets Intelligence and Research; and Ashok Hariharan, Partner and Regional Head of Tax MESA at KPMG. The discussion was moderated by David Staples, Managing Director Corporate Finance EMEA at Moody's.
Following an introduction by Sanjay Vig, Managing Director at Alpen Capital and Chair of ICAEW's Corporate Finance Faculty network in the Middle East, panellists and invited guests debated what fiscal reform will mean for business in the region. Panellists agreed that the lower oil price is not a disaster for GCC counties as they have more than US$2.5 trillion in reserves and very low percentages of debt.
However, for longterm economic sustainability, GCC countries must continue, and accelerate diversifying their revenues. Panellists 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.
Michael Armstrong, FCA and ICAEW Regional Director for the Middle East, Africa and South Asia (MEASA), said: "There is growing international focus on taxation. Countries are looking for more information on multinational companies who are shifting their profits to countries with lower tax rates. Now is therefore a perfect time for GCC countries to start levying taxes.
This will be in step with international trends and will also help to diversify revenues." Speakers said that GCC countries have been discussing a common tax framework for the past 10 years, which is now reaching its final stages.
Based on the core principles of the framework, each country will have the choice to implement its own tax legislation and system. Panellists explained that value added tax (VAT) is a viable option € and some form is expected to be introduced in the near future. This could be at a 3-5 percent rate initially, but there are likely to be some exceptions to the levy.
If introduced, VAT could generate up to 4-5 percent of GDP. Speakers also noted that countries most likely to impose VAT are the UAE and Oman. Other GCC countries are likely to follow, although Qatar is unlikely to introduce taxes at this stage. However, speakers agreed that the GCC countries are not ready to start imposing taxes right now as they are currently at different stages of preparation.
The biggest challenge they are facing is resources, both in terms of infrastructure and expertise. Finally, panellists warned that if the tax systems were not well designed there would be the potential for aggressive tax avoidance as has been seen in some countries in the West. The event was attended by almost 100 ICAEW members and senior business representatives from the major global and regional financial organisations.
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