VAT to add up to 2% of GDP to revenues
08 Feb 2018 - 0:00
By Mohammad Shoeb / The Peninsula
DOHA: The implementation of 5 percent value-added tax (VAT) on goods and services in the GCC region is expected to add up to 2 percent of GDP to revenues of governments, including Qatar, said an industry expert, yesterday.
Saudi Arabia and the United Arab Emirates (UAE) have already introduced VAT effective from January 1, 2018, a first for the Gulf region, which has long enjoyed a tax-free regime keeping in view the welfare of the people. However, other GCC member states, such as Kuwait, Oman, Bahrain and Qatar have not made any official announcement for the exact date of the implementation of VAT as yet.
“I am not sure about Qatar, but other countries in the region are projected to collect revenues between 1 and 2 percent of their respective GDPs from VAT… And I assume Qatar’s will also be along the same lines. But until an official number comes out, I don’t know the real answer,” Pierre Arman, Market Development Leader for Tax & Accounting at Thomson Reuters told The Peninsula on the sidelines of a seminar on the impact of VAT.
Arman added: “VAT is not a cost to businesses. It’s a sales tax passed on to customers and end-users of goods and services. But it will have a major impact on businesses, especially on the accounting system, which need to be managed properly.”
Once implemented in Qatar, businesses will be required to issue VAT-compliant invoices for every single sale and purchase details of goods and services to be recorded in the system to file VAT returns.
Asked about the impact of the proposed tax on the financial health of businesses and aggregate demand, he explained that since it’s not a cost to business, VAT will not affect sales and profitability of companies.
“What has been observed is that just before the introduction of VAT, or a given hike in sales tax rates, countries witness a rush for buying expensive items, such as cars, watches or any other consumer durable goods, followed by a slight slump in demand for such items for the first few months after the actual implementation of the tax.”
Commenting on the impact of VAT on price rise and inflation, Arman reiterated that since it is just 5 percent, which is the lowest rate in the world, the actual impact on inflation will not be that big.
The seminar on ‘Effects of Applying VAT on Businesses in Qatar’ was organised by Qatar International Chamber of Commerce (ICC) in collaboration with Thomson Reuters. It was well attended by representatives of businesses, account officials as well as audit firms.
The forum highly recommended that companies prepare early to apply this tax, to process all necessary financial and technological matters, in order to avoid any errors in institutions and companies when the VAT is applied later. The participating experts said 10 percent of the institutions and companies in the countries that applied VAT in the region, were entirely prepared to implement the new law. Whereas the other 90 percent of the companies adopted solutions and delayed measures in preparation for applying the tax, where despite of using outsourced help, they were not able to apply the tax successfully. The experts urged the companies to prepare for the VAT application from now and not wait for the issuance of the law and then prepare for the impact.
Organizing this seminar coincides with the upcoming introduction to VAT in Qatar, in aim to increase the awareness of the ICC members and the community on th is important financial reform, and the challenges that may result in businesses.