(MENAFN - Emirates News Agency (WAM)) Ernst '&' Young's MENA Tax Conference 2012, held in Dubai today, outlined the evolving tax landscape in the Middle East and North Africa (MENA) region. The conference was attended by more than 250 senior finance and tax professionals from across the region and was chaired by Sherif El-Kilany, MENA Tax Leader, Ernst '&' Young.
Over the past year, regional developments and economic pressures have impacted the taxation policies of almost all countries in the MENA region. On the one hand, countries have moved towards a more transparent and business friendly tax environment. On the other, we are seeing increased regulation and enforcement of tax compliance leading to increased administrative burden which, for foreign businesses, may translate to potentially higher tax cost. Most countries have lowered tax rates to encourage investment whilst fiscal policy dictates increased tax collections to strengthen public finances and fund social development.
Sherif said: "From a fiscal and tax perspective, the changes we are seeing are largely positive, with business and investment friendly tax laws and increased transparency of regulation and enforcement. The changes rightly factor in the impact of the Eurozone crisis which continues to cast a gloomy shadow.
We see MENA countries proceeding with their resources investment, infrastructure development and economic growth plans with more realism than we have experienced in the past." Regional tax authorities often take a much broader, and at times more local, interpretation of tax concepts that may be different from other jurisdictions. For example, the interpretation and application of new tax laws relating to foreign oil and gas contractors also requires local expert understanding and experience in dealing with the authorities.
A trend that could have considerable tax cost impact in the coming years is the increasingly rigorous tax assessment process and less attractive outcomes related to deemed profit tax declarations. Throughout the region we see tax authorities either tightening on deemed profit assessments or discontinuing this tax filing option.
Commenting on the factors defining the fiscal landscape during the years ahead, Sherif said: "From a regional tax perspective, we are likely to see a continuance of low corporate tax rates to encourage local and regional investment. Countries will continue to face fiscal pressures to increase tax collections to fund social programs and subsidies. We will also see a move towards more complex tax laws and regulations to broaden the tax net and enforce compliance.
These measures will create an increasingly challenging tax environment in many countries as the assessment process will become more involved with increasing level of scrutiny relating to cross border transactions and related party transactions. These trends will continue in almost all MENA countries."