Weekly Round-Up

This week:

  • ITIC held a "Capacity Building Workshop on Taxation in the Extractive Industry" in Tanzania
  • The Platform for Collaboration on Tax released their "Conference Statement"
  • The European Parliament Committee on Economic and Monetary Affairs approved a new EU corporate tax plan
  • The UN Committee of Experts on International Cooperation in Tax published the report from their fifteenth session
  • South Africa announced its proposal to increase the VAT rate
  • Serbia became the 112th member to sign the Inclusive Framework on BEPS
  • The IMF concluded a mission to Turkey and released a Staff Concluding Statement

Impending VAT in the GCC: Much Still to be Clarified

The slump in oil prices in the last few years has increased the pressure on the Gulf Cooperation Council (GCC) states (Bahrain, Kuwait, Oman, Qatar, Saudi Arabia and the United Arab Emirates) to seek more sustainable government revenues through taxation. Corporate income tax is currently the only direct tax imposed within the GCC, and even then Bahrain and the UAE only impose the tax on narrow sectors of the economy. Customs duty, imposed uniformly across the GCC, is currently the main indirect tax assessed in these countries. Just over three years ago, the need to introduce VAT intensified due to the ever increasing challenges on the governments to meet their budget commitments.

The Basis for the Harmonization of VAT and Excise Taxes in SADC

The Southern African Development Community (SADC) aims to become a Free Trade Area, Customs Union, Common Market, and Monetary Union through the introduction of the single currency, with support for regional integration by Member States utilizing the basic elements of fiscal policy coordination and harmonization. VAT coordination among Member States will ensure uniform treatment in the taxation of Member States' goods and services; limit the occurrence of tax fraud; and control imports/exports and management of information on cross-border transactions.

The Memorandum of Understanding on Cooperation in Taxation and Related Matters and the Protocol on Finance and Investment are two instruments that will help support the coordination of fiscal policies in the SADC. However, for easy implementation, bilateral agreements between Member States are recommended.