2004 News Story

GCC weighs implications of imposing sales tax

Member states of the Gulf Cooperation Council (GCC) are weighing the implications of imposing sales tax, and this topic is on the agenda of today’s meeting in Jeddah of the finance ministers of Saudi Arabia, the United Arab Emirates, Kuwait, Qatar, Oman and Bahrain. The proposal, presented by the UAE and supported by Saudi Arabia, is based on the experience of the European Union. If approved, the measure could be implemented by 2007. Once implemented, it would start with sales tax on products such as cigarettes and luxury cars. No tax would be imposed on essential commodities such as medicine, medical appliances and foodstuffs.

The GCC launched the Customs Union in 2003. Compared to 2002, inter-GCC trade that year rose by 19.5 percent to $21.5 billion, the highest volume since the GCC’s establishment in 1981. The GCC is a major consumer bloc with more than $80 billion in annual imports. Its total population exceeds 31 million, reporting a four percent annual population growth rate.  The GCC states also hold about 45 percent of the world's total oil reserves and 15 percent of its gas reserves.

In May 2001, Saudi Arabia slashed customs tariffs on imports from 12 to 5 percent in a move widely welcomed by businessmen as a major boost to the country's economy that would strengthen the Kingdom's competitive edge; this followed a decision to ease trade regulations to allow imports of goods from fellow GCC states under preferential tariffs.