Muscat: In 2017, the Gulf Cooperation Council (GCC) countries agreed and announced the first-ever Value Added Tax (VAT) framework to allow member nations to develop legislation to start a 5 per cent VAT rate in their respective countries.
ACCA (the Association of Chartered Certified Accountants) and law firm Al Tamimi & Company have joined forces to launch the new report - Value Added Tax – Middle East lessons learnt – which examines how the GCC countries adopted an indirect tax legal framework to replace decades of a tax-free environment. It also provides insight into the early transition period, highlighting the learning curve businesses, big and small, had to undertake to be VAT ready and compliant.
The study also showcases the interconnectedness between the work of professional accountants and the legal profession and offers a combination of commercial substance and legal perspectives.
ACCA’s head of Middle East, Fazeela Gopalani, says, "This is the third in the series of reports looking at VAT in the Middle East and we were delighted to work with our Al Tamimi partners. Up until 1 January 2018, the Middle East was a relatively tax-free haven attracting companies and individuals to its high disposable income shores.
"The global financial crash, political upheaval and falling demand in oil all contributed to the reverse in fortunes for the GCC nations and triggered a new approach to their finances. The growing trend of consumerism in the GCC nations represented an opportunity to collect a tax based on consumption, easy to collect at source, with a simple formula, and tried and tested globally. The accountancy profession and the legal fraternity have together provided the compliance safety net for businesses."
Shiraz Khan, Partner, Head of Tax, Al Tamimi quoted, “With the objective of diversifying their economies and reducing dependence on hydrocarbons, the GCC countries have undergone significant tax reform in recent years.
In addition to modernising their existing tax systems to bring them in line with international standards and regulations, the GCC states have sought to expand their tax base to include indirect taxes.
All taxes are imposed by law and the legal profession plays a key role in the development of tax laws, practice and precedent globally. Due to the rapidly changing tax environment in the Middle East and across the globe, it is becoming more important for the legal and accountancy professions to share knowledge and experiences and work together to navigate through the changes.”
This report also makes several recommendations, such as:
Engaging key stakeholders: tax authorities could consider a consultation period to enable businesses to give feedback on draft regulations before they become law.
Awareness campaigns: Tax authorities could launch awareness campaigns before the launch of VAT to help business understand how they will be affected and to educate businesses on their compliance obligations. They should also ensure detailed guidelines are issued ahead of launch
Adequate human and technological resources: it will be important for tax authorities to ensure they have adequate human and technological resources to administer the VAT system and to deal with public queries to facilitate taxpayers’ compliance with the VAT legislation. A website is integral to allow online VAT registration, filing and payment.