Soft or hard VAT?

The impact of Value Added Tax (VAT) on normal life was invariably the most discussed topic yesterday by both citizens and residents as the parliament approved on Sunday a law stipulating the implementing of VAT from January 1, 2019.

The move by the Kingdom comes as part of unifying and integrating the economic strategies of GCC countries. However, as the new tax approaches, many citizens and residents are unaware of the direct effect it would have on their lives. VAT is a type of tax that applies to all goods and services, and it’s usually assessed and collected on the value of the goods or services provided each time there is a sale and purchase transaction, amounting to five percent of the value of the commodity.

The unified GCC agreement grants each member country the right to adopt the suitable tax policy to exempt or impose a tax in the sectors of health, education, real estate, local transport, and financial services. Finance Minister Shaikh Ahmed bin Mohammed Al Khalifa stated that the VAT wouldn’t be implemented on a number of primary commodities, taking into consideration the interests of citizens. According to parliament sources, 97 commodities will be exempted from the tax.

The official statistics say there are 120,000 families in the Kingdom, which receive governmental financial assistance. Those families, according to experts and economists, will be the most affected once the new tax is implemented despite assurances from the part of authorities. Shura Council General Secretary Abduljaleel Al Turiaf said Shura members will discuss the new taxation system today. On his part, MP Jamal Buhassan hailed the implementation of VAT as it strengthens bonds between GCC countries, considering it a general commitment for GCC countries.