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 8: Setting a VAT Registration Threshold: GCC Considerations and Evidence from Dubai

Ehtisham Ahmad and Giorgio Brosio


Ehtisham Ahmad and Giorgio Brosio GENERAL CONSIDERATIONS A One of the key elements in the establishment of a GCC VAT is the determination of a compulsory threshold for the registration of VAT taxpayers. Small traders with annual gross sales/turnover below a VAT registration threshold are exempted from tax, and are not required to be registered for the tax. They do not account for tax on their sales, but are also not entitled to claim a credit for the tax paid on their business inputs. In effect, they are treated as final consumers, and are effectively “input-taxed”—in other words the threshold does not imply that they do not totally escape the tax burden, only that they do not interact with the tax administration and do not obtain refunds for the input taxes paid on imports and from other domestic suppliers. Note that all imports are subject to the VAT. The policy issues that arise for the UAE and other GCC countries include: (1) the level for the setting of an initial threshold; (2) whether there should be a single threshold; and (3) whether this threshold should be common across the countries in the GCC. Preliminary recommendations and considerations for the GCC are presented in Section B. In Section C we examine the GCC options in relation to data from Dubai for 2007/08. To our knowledge the only recent available information on sector-wise turnover for any of the Emirates is that for Dubai, which could be taken as a reference point...

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