IMF's Lagarde: VAT can add 2% to oil-hit GCC GDPsby Neha Bhatia on Feb 22, 2016
The managing director of International Monetary Fund (IMF) has claimed that the introduction of a value-added tax (VAT) in the GCC could raise revenues by up to 2% of the gross domestic product (GDP).
Christine Lagarde told a conference that she is confident GCC economies can implement the required fiscal adjustment to cope with a sustained period of low oil prices.
"Add to this [increased revenues] greater emphasis on corporate income taxes as well as property and excise taxes, and continue to invest in building tax administration capacity that could eventually allow for introduction of personal income taxes.
"Oil prices have fallen by two-thirds from their most recent peak but supply and demand-side factors suggest they are likely to stay low for an extended period."
Lagarde, who is in Dubai on the eve of the Global Women's Forum 2016, met with Vice President and Prime Minister of the UAE, and Ruler of Dubai, HH Sheikh Mohammed Bin Rashid Al Maktoum, while in the city.
As oil prices have plunged, the IMF has played an increasing role advising GCC governments on reforms to shore up their finances, and its recommendations have provided some governments with political cover to make difficult decisions that could lower living standards of their citizens.
Lagarde noted that the IMF had helped Kuwait to study the design of broad-based taxes such as VAT and a business profit tax.
According to Arabian Business, the Kuwait government has said it is preparing for such reforms but has not made a firm commitment to a specific plan.