VAT to Raise Cost of (P)GCC Businesses
World Economy

VAT to Raise Cost of (P)GCC Businesses

The introduction of a value added tax to (Persian) Gulf Cooperation Council Arab countries will increase the cost of doing business and compliance for firms, said 61% of the respondents to a survey.

This will discourage foreign direct investment, according to 17% of respondents, highlighted the first CFA Institute (P)GCC Societies Survey, launched by CFA Institute, a global association of investment professionals. The survey highlights economic, investment and employment trends and challenges in the (P)GCC region.

Amer Khansaheb, president of CFA Society Emirates, said: “The survey provides useful insight into the opinions and expectations of some of the most senior finance and investment professionals working in the council region (comprising Saudi Arabia, Kuwait, the UAE, Qatar, Bahrain, and Oman),” TradeArabia reported.

“The economic outlook for 2016 seems uncertain, with the vast majority of respondents (81%) expect low oil prices to impact the (P)GCC economy. Despite this uncertainty, the possibility of the introduction of VAT, and human resources are dominant themes.

“Views on employment opportunities for finance professionals in the (P)GCC market are fragmented. While 41% of respondents expect employment opportunities to decrease, 37% of respondents expect opportunities to remain the same.  As the economy’s potential cools, the majority of respondents express concern about the increased cost of conducting business with the possible introduction of VAT, as well as companies’ ability to attract, retain, and maintain the cost of quality talent,” he added.

Five Key Findings:

1. The majority of respondents (61%) believe that the possible introduction of a VAT to (P)GCC Arab countries will increase the cost of doing business and compliance for firms. This will discourage foreign direct investment, according to 17% of respondents.

2. Low oil prices will be the main factor affecting the (P)GCC Arab economy in 2016, according to 81% of respondents. Regional conflict is expected to be the second factor, according to 10% of respondents, followed by the slowdown in the Chinese economy, according to 6% of respondents.

3. Real estate, hospitality, and the construction sectors will drive investment over the next two years, according to nearly half (48%) of respondents, followed by diversified industrial products (12%) and transportation and logistics (12%).

4. More than half of respondents (51%) feel that levels of trust from regulators and financial institutions in the investment industry are higher than during the financial crisis of 2008-2009. Levels of trust have remained the same, according to 34% of respondents, and 15% of respondents feel that they are lower than before the crisis.

5. Shariah finance will continue to see development in the region, according to more than half of respondents (64%).

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