With the falling oil revenues, all the GCC member states have mutually agreed to introduce

value added tax (VAT) at a rate of five per cent in 2018, though the decision is yet to receive
final approval before being implemented, according to a top Omani official.
Darwish Al Beloushi, Omans Minister of Financial Affairs, said that GCC countries had already
reached a decision on the five per cent rate after negotiating on a rate between three and
five per cent.
A spokesman from the UAEs Ministry of Finance had earlier said GCC countries are yet to
finalise their implementation policy, but they have agreed that the tax will not be applied on
certain industries like education, and health care. Staple food items would also be exempted
from VAT.
The tentative policy for the tax implementation has already been approved by leaders of the
GCC countries, Younis Al Khouri, undersecretary at the UAEs Ministry of Finance had said
earlier.
He pointed that the UAE is expected to generate up to $3.72 billion as a result of introducing
VAT in the first year of implementation alone.
It may be noted that VAT has been adopted by 150 countries and contribute 20 per cent of
world-wide tax revenues. The average standard rate in EU countries (excluding new members)
is almost 20 per cent, where its revenues are 7.5 per cent of GDP.
If the current oil prices remain, oil and gas revenue in the GCC will fall significantly or even
disappear. The non-oil public revenue would be far from sufficient to cover public spending,
especially as public spending rises with respect to the GDP. This can push these economies to
run into major fiscal difficulties.
As such the GCC might need to take major steps on taxation including that of introducing a
value added tax with a uniform rate.