The UAE News report: Oman has announced income tax and become the first country within GCC nations by introducing the income tax from 2022, according to media reports. Now the question is that which country will be the next in line for the introduction of income tax in Gulf countries.
According to tax experts, Bahrain and Kuwait could join the club next within the region for the introduction of income tax. GCC countries are sitting on big oil wealth but because of the lower crude oil prices, they are thinking about alternative revenue resources.
Tax experts suggested that the next GCC country, which will announce the income tax may be from 2023 after Oman announces income tax from 2022.
Income tax in GCC: who is next
In order to increase tax collections for the Revenue, the Governments within the GCC region are looking at ways to diversify their tax base. Oman if the first GCC country that has shown an intent to introduce taxes on personal income, said Nimesh Goel, Partner at WTS Dhruva Consultants.
Goel added: “It is difficult to answer which GCC country will be the next-in-line to introduce personal income tax in GCC. I would say since all the countries already have in place an infrastructure, countries like the UAE and Bahrain would want to first introduce a tax on the income of companies rather than taxing the income of individuals. Introduction of corporate income tax should bring stability and more foreign investment in the region.”
Also, the fact that countries across the globe which levy income taxes also offer various benefits in terms of residency, social security etc. Accordingly, this is a wider question to answer for all such countries.
What would be the percentage of the tax?
Since OMAN has given a window of 1 year approximately, it may be expected that other Gulf nations shall continue to announce the introduction of income tax in GCC thereafter. The implementation of such tax shall require a detailed roadmap, said Goel.
He added that the rates of income tax depend on various factors such as progressive rates, demographic composition, social security benefits etc. In my opinion, if income tax is ever introduced, the rate of tax would not be too high just like VAT and it could be anywhere in the range of 10-15%.
Top reasons
The main reason behind the shift is from oil to non-oil-based economy. With the onset of the reduction in global oil demand, it is evident that all the GCC economies will have to drastically change the revenue-generating sources. Also, on the advice of international bodies such as IMF, OECD etc., all GCC nations may decide to introduce the personal tax. This gives strong support from a policy perspective than to act alone. Other reasons which may involve economic are disparity in the income levels, low rate of corporate income tax etc. which may vary for each nation.
