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A GCC-WIDE implementation of value-added tax could be delayed to mid-2013 as administrations are unprepared for such a shift and an official decision is yet to be taken, an expert in Dubai said recently.
During a GCC taxation seminar in Dubai, economists emphasised the need for governments in the region to diversify revenue tools and reduce dependence on oil and gas revenues.
"The problem of trying to get an integrated VAT by 2012 when the free trade agreements kick in, is going to be very tight," said Ehtisham Ahmad, adviser in the Office of the Prime Minister of the UAE, and a senior fellow at the Centre of Economic Research at the University of Bonn and at the Asia Research Centre of the London School of Economics.
Ahmad, who earlier headed the International Monetary Fund's regional efforts for GCC VAT implementation, said starting from scratch could take 18 months under optimum circumstances, but "three years is more like it".
Ahmad said that GCC ministers will have to agree on implementing VAT later this year before the matter can move on to the heads of state.
"It is important to get the green light from ministers to start harmonising the processes," he said.
While the VAT implementation may go ahead even if all GCC members are not in unanimity, those left out will suffer, as they would be stepping out of the common markets, Ahmad said.
"Producers in a country not in the VAT union, would not be entitled to refunds. That would put countries outside the VAT zone at a disadvantage so it would be damaging for them," he said.
While Saudi Arabia has put administration systems in place and is ready to implement VAT theoretically, Qatar, Bahrain and Oman are currently working on developing the system," Ahmad said.