ME NEWS BUREAU: In a major step towards making sure the nation's future prospects are steady and safe, Gulf countries Saudi Arabia and United Arab Emirates (UAE) have introduced the Value Added Tax (VAT) from Monday. This is the first time a tax system have introduced in Gulf countries to ensure that income must be generated from non-traditional sources.
The other Gulf Cooperation Countries (GCC) like Bahrain, Kuwait, Oman and Qatar will also introduce the VAT in the near future, atleast in 2019.
Tax is an unknown quantity for the gulf people and it remains to be seen how well the gulf people cop up with the new financial system.
Saudi Arabia and UAE will impose five percent tax on most goods and services including food, clothes, electronics and other major consumer bills. Tax exemptions has been given to medical services and public transport.
Oil reserves fuel the growth of many Arab countries as more than 90 percent of Saudi Arabia's budget revenue comes from oil industry while the same industry churns out 80 percent revenue for UAE.
But the oil rich countries realised that oil alone won't drive the future prospects and never feed the generations to come.
International Monetary Fund (IMF) have long called for Gulf countries to diversify their source of income from oil reserves.
Meanwhile the new tax system will give positives and negatives for countries like India who depend largely on the income of overseas Indians. VAT is definitely going to make a cut on the outflow of money from Indians working over there, especially states like Kerala, as Kerala already facing a huge burden in the wake of the return of their natives from Gulf countries.
Contrary the VAT system will add colors to the job hopes of many youngsters as the new tax system require more commerce graduates to tally the mathematical confusions that will arise during the initial stages until a full fledged VAT to be established.
