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Saad86
Joined: 16 Mar 2012 Posts: 22
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Posted: Thu Dec 10, 2015 6:10 pm Post subject: Goodbye to Tax free Dubai and Gulf countries |
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This is interesting the Gulf states and Gulf cooperation council will now start taxing its citizens, I assume that also include those resident in the country.
So expect living costs to go up further!
Below is text of article from The Times.
Oil slump forces Gulf states to tax the people
Six Gulf states will introduce VAT over the next three years to stem the plunge in government revenues
Six Gulf states will introduce VAT over the next three years to stem the plunge in government revenues Atlantide Phototravel/Corbis
Hugh Tomlinson Qatar
Published at 12:01AM, December 10 2015
Six Gulf states, hard hit by the slump in global oil prices and costly military campaigns, have said that they will tax their citizens for the first time.
The Gulf Co-operation Council (GCC) — a loose federation of Saudi Arabia, Qatar, Kuwait, Oman, Bahrain and the United Arab Emirates — will introduce VAT over the next three years in an attempt to stem the plunge in government revenues.
The move marks a radical policy shift: the states levy a few charges on their citizens, such as traffic tolls, but do not tax income or purchases. This tax-free environment has enabled cities such as Dubai to attract foreign expertise and labour as they plan ahead for the day the oil runs out.
With the price of oil dropping close to $40 a barrel this week — the lowest since the financial crisis — the tax initiative underscores growing concern throughout the region.
Sheikh Tamim bin Hamad al-Thani, the ruler of Qatar, the world’s richest country per capita, told the nation last month that the government could no longer “provide for everything”. Too many people were dependent on the state, which “reduces the motivation of individuals to take initiatives and be progressive”, he said.
Taxation has long been mooted as the Gulf states try to wean their economies and populations off a dependence on oil and gas. A tradition of jobs for life for most has left the region with a bulging public sector and governments have struggled to persuade people to join the private sector and diversify the economy. Qatar and the UAE have reintroduced military service in a bid to foster a strong work ethic.
Saudi Arabia has quietly withdrawn tens of billions of dollars from global investment funds over recent months as it seeks to plug a widening budget deficit. The world’s largest oil exporter has seen its vast foreign reserves, valued at $700 billion last year, reduced by more than $70 billion in the past 12 months.
It has shelved dozens of projects and reined in spending at home, but continues to pursue an aggressive foreign policy. It supports anti-government groups in Syria and has spearheaded an eight-month military campaign against rebels in Yemen who are backed by the kingdom’s arch-enemy, Iran.
Bahrain, riven by a sectarian insurgency that has continued unabated since the 2011 Arab Spring, yesterday announced 30 per cent cuts in government spending. The UAE announced in July that it was relaxing state subsidies on petrol, raising fuel prices in a first step towards curbing the gas-guzzling habits of its citizens. Cheap fuel is seen as a birthright in the Gulf, but the UAE move is the clearest indication yet that those days are nearing an end. The International Monetary Fund projects that the UAE will post its first fiscal deficit since 2009 this year.
Despite their financial woes, the Gulf states have refused to cut oil production — ensuring a glut and effectively keeping prices low as they fight for market share with American shale and Canadian tar sands producers. |
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scot47

Joined: 10 Jan 2003 Posts: 15343
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Posted: Thu Dec 10, 2015 8:23 pm Post subject: |
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VAT is too complex and relies on a "culture of cooperation" which is not present in the Gulf. A Sales Tax is more likely. They are different. |
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veiledsentiments

Joined: 20 Feb 2003 Posts: 17644 Location: USA
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Posted: Fri Dec 11, 2015 2:05 am Post subject: |
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Since there is actually very little produced in the GCC that is sold in the GCC, (petroleum?) either they intend a "sales tax" or there will be no one to VAT tax...
VS |
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bdbarnett1
Joined: 27 Apr 2003 Posts: 178 Location: Phnom Penh, Cambodia
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Posted: Fri Dec 11, 2015 4:55 pm Post subject: |
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The sky is falling because of a sales tax? Please... |
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waltgomez
Joined: 03 Jul 2014 Posts: 105
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Posted: Sat Dec 12, 2015 2:08 pm Post subject: |
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Just had a meal at an Indian restaurant in Al Khobar: SAR 10. Then, I bought a dishdasha for SAR 20. A taxi ride in a non metered taxi was SAR 15. Tax this! |
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RustyShackleford

Joined: 13 May 2013 Posts: 449
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Posted: Sat Dec 12, 2015 2:39 pm Post subject: |
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bdbarnett1 wrote: |
The sky is falling because of a sales tax? Please... |
A little sales tax won't hurt anybody too badly, but if they start taxing salaries, the place will lose a lot of it's appeal to expat laborers. Maybe they won't all go away at once or even too quickly, but places like Saudi Arabia don't lend themselves to people sticking around for too long. |
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bdbarnett1
Joined: 27 Apr 2003 Posts: 178 Location: Phnom Penh, Cambodia
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Posted: Sat Dec 12, 2015 2:52 pm Post subject: |
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RustyShackleford wrote: |
bdbarnett1 wrote: |
The sky is falling because of a sales tax? Please... |
A little sales tax won't hurt anybody too badly, but if they start taxing salaries, the place will lose a lot of it's appeal to expat laborers. Maybe they won't all go away at once or even too quickly, but places like Saudi Arabia don't lend themselves to people sticking around for too long. |
I agree, an income tax would give pause. I just got done with a 4 year stint in the UAE, 10 km from the Saudi border. |
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2buckets
Joined: 14 Dec 2010 Posts: 515 Location: Middle East
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Posted: Sat Dec 12, 2015 11:06 pm Post subject: |
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KSA introduced the idea of an income tax in the mid 80s. The country pretty much came to a grinding halt as most of the professionals who keep the country running walked off the job. Tax was rescinded within 24 hours, and then they paid out all the GOSI money to placate the masses. And this was a time of much higher salaries and benefits.
"culture of cooperation" only when taking exams.
A sales tax would just be an opportunity for greedy retailers to increase prices with little hope of the money reaching the government. Doomed by a lack of accountability.
If the GCC hadn't wasted so much money on military spending, grandiose projects, and CORRUPTION, they wouldn't be in such a state. Like many old time Gulf workers, I've always hoped to see their economic downfall, and now that may be possible. That's what they get. |
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1st Sgt Welsh

Joined: 13 Dec 2010 Posts: 946 Location: Bandar Seri Begawan, Brunei
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Posted: Sun Dec 13, 2015 7:40 am Post subject: |
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Interesting discussion .
2buckets wrote: |
If the GCC hadn't wasted so much money on military spending, grandiose projects, and CORRUPTION, they wouldn't be in such a state. Like many old time Gulf workers, I've always hoped to see their economic downfall, and now that may be possible. That's what they get. |
I've actually heard this sentiment expressed by quite a few Gulf expats since I've been here, especially, at least it seems to me, if they happened to have worked in Kuwait and the KSA. Personally, I really like the Omanis as people, but, if it hadn't been for the oil and the foreigners who discovered and drilled for it, then I think it's fair to say that Oman, and the other GCC countries, would have remained third world backwaters. Certainly I doubt that any nations in history have enjoyed the same level of economic opportunities that the GCC nations have had and these opportunities, lets be honest, haven't come about due to the local's electrifying work ethic . Anyway, the economic system here, at least as it applies to the GCC nationals, seems to be geared more to redistribution, instead of productivity, and it's clearly not sustainable. Various governments have been trying to change this, but, the culture of entitlement seems to me to be pretty entrenched so I'm not sure if that will actually catch on in any meaningful way.
In regards to taxation, I think, quite simply, that they will have do something and it's either taxation, cutting spending, or a combination of both. Any of these can cause problems. As it applies to us, if the financial incentive to work here is lessened then, quite simply, less of us will want to work here. I know heaps of people who have worked in Saudi and the reason that they went there has been pretty consistent: money. Of course, there is nothing wrong with that, but, I've never spoken to anyone who went to live and work in the KSA for the nightlife and the welcoming and tolerant culture.... |
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scot47

Joined: 10 Jan 2003 Posts: 15343
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Posted: Sun Dec 13, 2015 11:17 am Post subject: |
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Most Saudis do not fully understand the concept of tax. They cannot understand why people in the outside world pay so much in tax. They certainly do not like the idea of giving money to the State. The process should be in reverse according to them. They see the function of the State as to distribute largesse, not to tax and spend. |
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gregory999

Joined: 29 Jul 2015 Posts: 372 Location: 999
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Posted: Sun Dec 13, 2015 2:03 pm Post subject: |
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scot47 wrote: |
They certainly do not like the idea of giving money to the State. The process should be in reverse according to them. They see the function of the State as to distribute largesse, not to tax and spend. |
Of course, the Saudis want their share from the oil revenue, that's why they do not pay tax!  |
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veiledsentiments

Joined: 20 Feb 2003 Posts: 17644 Location: USA
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Posted: Sun Dec 13, 2015 4:26 pm Post subject: |
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scot47 wrote: |
They see the function of the State as to distribute largesse, not to tax and spend. |
That does fit into the tribal tradition. Sheikh Zayed kept the UAE "treasure" under his bed in a trunk before the advent of the oil age... or so went the tale. Back then he personally decided who got what. And it hasn't really changed all that much... except that they've added banks... and cover expenses for all in education and health... and those in the right tribes and good standing with the royals get extra. (need a block of flats Ahmed?)
So it will pretty much stay until the oil runs out... then it gets interesting. A few taxes now and then will be tried, but will only delay the inevitable...
VS |
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bdbarnett1
Joined: 27 Apr 2003 Posts: 178 Location: Phnom Penh, Cambodia
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Posted: Sun Dec 13, 2015 4:29 pm Post subject: |
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veiledsentiments wrote: |
scot47 wrote: |
They see the function of the State as to distribute largesse, not to tax and spend. |
That does fit into the tribal tradition. Sheikh Zayed kept the UAE "treasure" under his bed in a trunk before the advent of the oil age... or so went the tale. Back then he personally decided who got what. And it hasn't really changed all that much... except that they've added banks... and cover expenses for all in education and health... and those in the right tribes and good standing with the royals get extra. (need a block of flats Ahmed?)
So it will pretty much stay until the oil runs out... then it gets interesting. A few taxes now and then will be tried, but will only delay the inevitable...
VS |
Wasn't it Zayed's brother who kept it locked up and that's why they ran him out? |
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gregory999

Joined: 29 Jul 2015 Posts: 372 Location: 999
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Posted: Sun Dec 13, 2015 5:09 pm Post subject: |
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bdbarnett1 wrote: |
Wasn't it Zayed's brother who kept it locked up and that's why they ran him out? |
Indeed, Zayed's brother, Shakhbut, during his reign, he adopted an aggressively mercantilist strategy, keeping his reserves in gold.
He was deposed in a bloodless coup by the British-led Trucial Oman Scouts to the benefit of his brother Zayed bin Sultan Al Nahyan.
https://en.wikipedia.org/wiki/Shakhbut_bin_Sultan_Al_Nahyan |
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veiledsentiments

Joined: 20 Feb 2003 Posts: 17644 Location: USA
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Posted: Mon Dec 14, 2015 3:02 am Post subject: |
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All the leaders kept it locked up... apparently it was felt he didn't share it properly. (rather similar to what happened in Oman when Sultan Qaboos' father was deposed and he was put in power... for rather the same reason) The end of the story is that Zayed invited him to return in the early 70s.
VS |
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