Businesses in Qatar are running out of time to get ready for a new tax that GCC nations will soon impose on consumers, financial analysts have said.

The 5 percent value-added tax (VAT) is expected to take effect here in 2018 as part of a GCC-wide agreement.

It comes as Qatar’s government forecasts budget deficits for the next three years amid falling oil prices.

This doesn’t necessarily mean bad news for consumers, however.

Businesses to absorb cost

For one thing, the consumption tax is expected to exempt certain food items, as well as the cost of education, healthcare and social services.

And according to audit firm BDO Qatar, which has been holding seminars with local firms, “retailers may reduce their profit margins and absorb some or all of the VAT costs” in order to maintain their sales and survive in the market.

In anticipation of this, companies need to be ready to change how they do business in Qatar, said Alexis Antoniades, an associate professor at Georgetown University’s School of Foreign Service in Qatar.

Speaking to Doha News, he said VAT compliance costs will be especially high for small and medium-sized enterprises (SMEs).

“These firms will need to change their IT, HR, procurement, finance and marketing processes, and they will need to have auditors check and approve their books,” he said.

Antoniades warned that this could potentially slow down any progress Qatar has made in establishing a “vibrant SME sector.”

To minimize the damage, he suggested the government opt for a single rate, and introduce a high tax threshold to exclude SMEs from the burden of compliance.

Officials should also continue to keep the private sector informed about what’s coming, he added.

“Poor planning and poor bookkeeping could potentially bring the system down, so the authorities should start immediately setting up the tax authority structure and educating the private sector.”

Reactions

Though it’s still two years off, Qatar’s decision to impose a new tax has been sparking debate in the community.

On Twitter, supporters said VAT will provide a new source of revenue for the government and spur more competitive pricing from businesses.

https://twitter.com/Yousef_AG/status/782595124043841536

Last year, Qatar’s Minister of Development, Planning and Statistics, said introducing a tax system was an “urgent” need that would prompt the government to better rationalize its spending.

However, others worry about how a VAT would affect Qatar’s businesses and job market.

And finally, some said they were happy to pay a VAT as long as all consumers were in the same boat.

@NadaBadawi @dohanews one point of clarification: as long as everyone is subjected to them, I’m for them.

— Andrew Clark (@StartToday09) October 2, 2016

Thoughts?