Fiscal Reforms in the Middle East
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Fiscal Reforms in the Middle East

VAT in the Gulf Cooperation Council

Edited by Ehtisham Ahmad and Abdulrazak Al Faris

Although oil windfalls have opened a window of opportunity for the Gulf States, at the same time they have created numerous problems. In particular, the uncertainty associated with periods of boom and bust in the oil market has made the formulation and implementation of sound fiscal policies a formidable task. This insightful book focuses on the role of fiscal policy in common markets, especially in the context of the supranational constructs in the Gulf Cooperation Council, comprising Saudi Arabia, Kuwait, Bahrain, Qatar, the United Arab Emirates and Oman. It draws on the experience of the EU and the importance of VAT, and reflects on the other main common market in Central America.
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Chapter 5: The European VAT and the Common Market Framework: Lessons for the GCC

Christophe Waerzeggers


Christophe Waerzeggers The EU has probably the longest and most extensive experience in operating a harmonized VAT system in a common market. This paper focuses on the way in which the EU VAT deals with the common market. As a result, a basic knowledge of the EU VAT is likely to be of assistance to policymakers in designing a common VAT framework for the GCC. Section A explains the role the VAT played in the EU internal market integration process. It also highlights which elements of the continued integration process in turn contributed to the development of EU VAT. Section B goes on to discuss the basic characteristics of EU VAT, comparing it with a “model” or “best practice” VAT. Section C deals with one aspect of EU VAT in particular, the intra-EU trade arrangements. This issue, and especially the fraudulent use that has been made of it in recent years, continues to be at the forefront of VAT debate in Europe; it is also of particular importance to the GCC if it intends to operate a common VAT in a borderless common market without a centralized VAT administration. Section D concludes by providing some useful lessons from the European VAT experience, which the GCC might wish to consider when designing a common VAT framework for its common market. A DRIVERS OF EU VAT COORDINATION History The EU founding members1 were among the first countries in the world to adopt VATs. Of those, France in the early 1950s was the...

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