Officials of the Gulf Cooperation Council agreed to a plan to add a value-added tax in their six nations, suggesting low oil prices may be behind the new support for the potential policy, Reuters reported Sunday.
At a meeting for the GCC's Financial and Economic Cooperation Committee in Doha, the leaders drafted an agreement to be endorsed by several governments that would implement the value-added tax, or sales tax, according to Kuwait's state news. VAT would mean major economic reform for the wealthy Gulf countries where residents are used to nearly no taxation and lots of social welfare spending.
The GCC states have relied on oil exports as 80 to 90 percent of their revenue. The nations have been considering adding a VAT for years, but renewed support on Sunday suggests low oil prices may be behind the potential reform. Many economists have been recommending the countries to diversify their revenue so as not to rely on oil prices, according to Reuters.
Saudi Arabia, the authority in OPEC, has been criticized for not cutting supply on oil to increase prices when several nations heavily rely on the revenue. Cutting supply would mean cutting the kingdom's market share.
Kuwait's Finance Minister Anas al-Saleh, who was quoted in state news, didn't give a time frame for when the sales tax would be implemented or the tax rate, suggesting the details have not been decided.
Saleh said the GCC officials planned to ask the International Monetary Fund to look into the effect of low oil prices on Gulf states.
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