Experts call for delaying implementation of VAT

Amidst plans in place to introduce the Value-Added Tax (VAT) in early October 2018, economic analysts and experts are urging the government to postpone the move, citing that the businesses in the Kingdom are not prepared for the consumption tax. The Kingdom is all set to become the third GCC country to implement VAT after Saudi Arabia and the UAE and the economists are of the opinion that the implementation of VAT will only have a short-term impact on the economy.

Speaking to Tribune, Economic and Political Analyst Dr. Yousef Hamed Mashal said, “The VAT is being implemented in agreement with other GCC countries. Although the date is not fixed, the Finance Ministry has issued a statement regarding its decision to go ahead with the implementation.

“There won’t be any long-term impact on the economy once the VAT gets implemented. But the consumer spending will see a decline in the first few months following VAT implementation. Considering the present economic conditions, the private sector can’t afford a reduced consumer spending and hence my opinion as an economic analyst is that the ministry should postpone its decision. “It can implement VAT as soon as the economy is back on track with private sector prepared to accept the consumption tax. If you see, South Africa took a long seven years to implement this tax after making the decision.”

The economist said the government must be expecting annual revenue, somewhere in the neighborhood of BD 500 million, once the VAT is implemented.

“The five percent VAT is a crucial decision, something that should be implemented considering the high budgetary deficit the Kingdom has. But we should acknowledge that it is the consumer at the tail end of the consumption chain, who bears the burden of paying this five percent. The businesses will continue to make profits but the consumer will suffer a lot.”