Gulf States discussions on plans to introduce value-added tax in the region will be finalised by the end of this month, a UAE official was heard of saying. In fact, there has been question of introducing such measure for almost 10 years.
However the recent sharp reduction in oil revenues together with some prior advice of the IMF urging the GCC States to introduce such a tax as a way of ensuring a reliable inflow of government revenues and safeguarding against volatility of the oil market have possibly made the difference.
In the minds of many, it is either this or the possibility of record budgets deficit that could be behind this sudden push in the introduction of this levy. Although 3 to 5% was proposed by the GCC wide committee as a taxation level that is by the way tacitly accepted, it is rather the range and specifics of the carrying goods and services that is really the object of lengthy discussions. A figure has not been set yet and if it is, it will have to be approved, reports the Gulf News of yesterday.
The introduction of Corporate Tax for companies also, in the UAE has been mulled upon for some time now and is still under study. At street level of some of the GCC countries, there is also question of introducing some sort of income tax, at least for all expatriates high earners for starters.
At this conjecture, Standard and Poor’s predicts that 2015 profit growth of the UAE’s banks could be slipping towards the 5 to 6%, basically because of the macroeconomic challenges and the absence of big improvements in asset quality that is biting into their earnings.
UAE banks together with their GCC counterparts have enjoyed high earning growths prior to June 2014 and these days despite the subdued returns, these are unlikely to face a similar situation to that of 2008 when the bursting of a real estate bubble and debt problems hammered the local economy of Dubai.