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IMF urges UAE to widen taxes but curb complexity

The gap is much wider than other emerging, developing and advanced economies, therefore, the oil-producing Gulf countries have been introducing taxes for the past few years.

These policies are consistent with reducing dependency on hydrocarbon revenue and enhancing macroeconomic stability. Considerations for corporate income tax (CIT) reforms have recently come to the fore in the GCC, prompted by the changing international landscape of taxing multinational enterprises and the revenue diversification process.

According to the IMF, the GCC has been resilient to recent shocks and the economic outlook remains favourable.

“Spillovers from regional conflicts have been limited. Strong non-hydrocarbon activity supported overall growth amid reform implementation. The outlook is positive as the envisaged easing of oil production cuts and natural gas expansion spurs the recovery in the hydrocarbon sector while the non-oil economy continues to expand. Inflation is stabilizing at a low level while external buffers remain comfortable despite current account balances having narrowed,” the Fund said in the latest note on regional economies.

The conflict between Israel, Hamas, Iran, Syria and Lebanon has been keeping the Middle East on tenterhooks due to fear of escalation. However, GCC countries have been a safe haven in this whole conflict.

IMF added that tensions in the Red Sea have so far had a muted impact on GCC economies, with trade, investment, and tourism flows remaining largely unaffected. The daily export volume from major GCC ports has rebounded, albeit to the lower end of historical levels.

“In the UAE, real GDP growth remained robust – 3.6 per cent – as non-hydrocarbon growth, supported by continued rebound in tourism, ongoing policy support, capital inflows, and increased capital spending, more than counterbalanced negative hydrocarbon growth,” it added.