This document explores the IMF's recommendations for GCC countries to modernize their tax systems, including the introduction of a personal income tax, corporate tax, consumption tax, and value-added tax (VAT). It discusses the benefits and challenges of implementing a VAT in these countries, including the potential to reduce public deficits and increase tax revenues. The document also examines the relationship between oil prices and public finances in the Gulf economies, highlighting the need for these countries to diversify their revenue sources and reduce their dependence on oil exports.
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[...] These low inflation situations sometimes led to deflation, i.e., periods of sustained decline in the general price level. This was the case, for example, in Qatar in 2009 and 2010, and in Saudi Arabia in 2017. Prolonged periods of deflation can have adverse consequences on economies because it is a self-sustaining phenomenon, particularly in the presence of debt: this is the debt-deflation vicious circle highlighted by economist I. Fisher in the 1930s. Moreover, inflation appears to remain a relatively volatile phenomenon for Gulf economies, as indicated by the variance of the inflation rate (table 5). [...]
[...] Finally, we looked at the evaluation of the share of public debt rating agencies in the United Arab Emirates and Saudi Arabia. These ratings, most often expressed in the form of a letter or a group of letters, are published regularly by Moody's, Fitch, and Standard & Poor's Once again, we were able to reconstruct the history of these ratings via the Tradingeconomics.com website.25. We have, in summary: Table 3 - Data Series Used Variable Field Period Source Budget balance 6 Gulf countries 2009-2018 Central Bank of each country (tradingeconomics.com) GDP" 6 Gulf countries 1970-2018 World Bank Inflation 6 Gulf countries 2009-2018 World Bank OPEC Basket Price OPEC countries 2009-2018 OPEC Amount of VAT collected Saudi Arabia and the United Arab Emirates 2018 Press Articles Debt notation Saudi Arabia and the United Arab Emirates 1996-2018 Trading Economics Descriptive statistics We provide below the descriptive statistics of the series described above. [...]
[...] We can therefore analyze the first effects of the implementation of such a fiscal instrument. To do this, we proceed to a double classical calculation in the literature29 : First, we report the VAT collected amounts to the GDP of a year, then we calculate the 'productivity' of the VAT, defined as follows: The VAT productivity indicates what share of the GDP, each percentage point of the standard VAT rate collects. It is, in short, a measure of the tax's efficiency. [...]
[...] The coefficient of determination This is equal to 0.3021: nearly 30% of the variations in the budget balance are thus explained by the evolution of the price of oil. At the time we are writing these lines, the price of oil reaches $62.31 (oil price of theOPEP Basket Price as of September 26, 2019). With such a price of oil, the average public deficit of the GCC countries would not have been but 3.1%, calculated as follows: This result demonstrates the intuition developed in Section II: the public finances of the Gulf economies are, to some extent, dependent on fluctuations in oil prices. [...]
[...] Introduction of VAT in Gulf Countries MONTPELLIER BUSINESS SCHOOL Master Grande École Programme The introduction of VAT in Gulf Countries Master's Thesis Presented by XXX XXX Under the supervision of Professor July 2019 « Montpellier Business School does not intend to give any approval or disapproval to the opinions expressed in this thesis; these opinions must be considered as belonging to their author. Table of Contents I. Introduction II. VAT and the Gulf Economies: A Literature Review 1. VAT: A Recent Tax 2. VAT: What's it all about? 3. What we know about taxation in the Gulf Cooperation Council (GCC) countries 4. Why did a VAT become necessary for the Gulf countries 5. Formulation of the General Problem III. [...]
