Browsing 'tax' News

Omar Chatriwala / Doha News

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Qatar’s Cabinet has approved draft legislation to implement two new taxes in the country.

They include a new selective tax on fast food, luxury goods and other items; and a 5 percent value-added tax (VAT) aimed at businesses.

Both taxes are part of GCC-wide agreements that hope to boost revenues for countries across the Gulf amid lower global oil prices.

Omar Chatriwala / Doha News

Cabinet sessions are held at the Emiri Diwan

The executive regulations had already cleared the Cabinet once. But they got a second sign-off yesterday during its weekly meeting, and after it was revised by the Advisory Council.

And according to Arab News, GCC finance ministers will meet in Bahrain today to discuss the further rollout of the taxes.

Sin taxes

Officials previously said that selective taxes would be “imposed on goods harmful to human health and the environment,” as well as specific luxury items.

This includes alcohol, tobacco, energy drinks and soda, among other things.

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No exact date has been given for their implementation.

However, the IMF has previously said they would be rolled out this year, and Saudi officials have floated an April deadline. However, this has since passed.

According to QNA, the draft legislation on selective taxes includes provisions on “tax entitlement, the declaration of the loss or damage of selective goods, inspection of damaged goods, registration, tax declaration, rules of payment of tax in the case of local production, maintaining of accounting systems, the language of accounting records, and control and inspection ruler.”

VAT tax

Meanwhile, the VAT is expected to take effect sometime in 2018.

It is a consumption tax, but will exempt certain food items, as well as the cost of education, healthcare and social services.

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Over the past several months, local businesses have been urged to prepare for the rollout of VAT.

Speaking to Doha News last fall, one expert said the tax may slow down growth in the small to medium-sized companies sector.

This is because they will need to budget for lots of compliance costs.

“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,” said Alexis Antoniades, an associate professor at Georgetown University’s School of Foreign Service in Qatar.

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

Cost of living

Though news of the taxes has not sparked much discontent within Qatar, the fees are likely to cause the cost of living to rise soon.

According to the International Monetary Fund, inflation will more than double from 2.6 percent currently to 5.7 percent by 2018.

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One example of higher costs can be seen at the Qatar Distribution Co. (QDC) in Abu Hamour.

Last month, the alcohol warehouse warned customers to stock up before import taxes on spirits double.

Additionally, eating out could also become more costly. Speaking to the Peninsula this week about the potential effects of the VAT, one restaurant owner forecasted higher prices for the meals they serve.

Are you concerned about the impact on your wallet? Thoughts?

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A draft law governing new “selective” taxes has been approved by Qatar’s Cabinet and could be implemented as early as April this year.

According to QNA, the tax will be “imposed on goods harmful to human health and the environment,” as well as specific luxury items.

Officials in Doha had first warned of the upcoming sin taxes last June, but said they would apply to tobacco, fast foods, and soft drinks.

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It is unclear what a selective tax related to the environment or luxury goods would look like.

QNA added that Qatar’s law was prepared in accordance with a unified GCC agreement. It did not state when the tax would be rolled out.

But the International Monetary Fund (IMF) said Qatar’s sin taxes would start this year.

And last month, Saudi finance minister said they could be introduced across the GCC in April.

The Gulf is also on track to introduce a separate, value-added tax in 2018.

That consumption tax will most likely affect businesses. It is expected to exempt certain food items, as well as the cost of education, healthcare and social services.

Health spending

The decision to impose sin taxes comes at a time when Gulf countries are seeking additional revenue streams due to lower oil prices.

But another incentive to impose the fees could involve rising healthcare costs.

Qatar and other GCC nations heavily subsidize healthcare for their citizens, and the growing prevalence of diseases like obesity and diabetes are taking their financial toll.

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By 2020, Qatar’s healthcare costs are expected to double to $8.8 billion a year as it contends with a larger, older and sicker population, Alpen Capital said.

BMI Research has forecast that the region will take these rising costs into account. In a report this month, it added that the longstanding obesity epidemic will be a key driver of policy decisions in the coming years.

Rising debt

Meanwhile, taxing luxury goods could provide residents a financial incentive to spend within their means.

That’s no small feat in Qatar, where 75 percent of the local population is in debt.

Chantelle D'mello / Doha News

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A Qatar University study found this was in part due to social expectations on nationals to buy the “right” watches and handbags.

There is also pressure to have the “right” furniture or chocolates to offer guests, and to attend parties and give expensive gifts.

Concerned about this trend, Qatar’s Emir has urged residents to “cut extravagance and waste.” He’s also reminded them that the government can no longer “provide for everything.”

Thoughts?

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Qatar is “moving in the right direction” amid lower energy prices and is well-positioned to grow in 2017, the International Monetary Fund (IMF) has said.

In a year-end note, the IMF praised authorities’ decision to reduce subsidies on petrol, electricity and water in 2015 and 2016.

It also hailed Qatar’s plan to implement additional taxes on tobacco and soft drinks starting this year, which will help generate extra revenue.

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The government first warned of the upcoming sin taxes last June. But it did not elaborate on when the fee would be implemented.

In a report at the time, the Ministry of Development Planning and Statistics (MDPS) said the tax could also apply to fast foods.

Value-added tax in 2018

The MDPS also confirmed then that Qatar will introduce a 5 percent value-added tax (VAT) in 2018 as part of a GCC-wide agreement.

Taking this into account, the IMF said:

“The fiscal adjustment planned in 2017 by the authorities is moving in the right direction.

During 2017–18, further subsidy cuts, increase in public fees, a moderate recovery in global commodity prices and the implementation of a VAT will drive inflation, which is expected to moderate back to low levels over the medium term.”

The VAT doesn’t necessary spell bad news for consumers, according to experts.

This is because it is expected to exempt certain food items. The cost of education, healthcare and social services will likely also be excluded.

And audit firm BDO Qatar previously said “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.

World Cup

One more factor working in Qatar’s favor in the coming years is non-energy-related growth in the form of World Cup spending.

According to the IMF, this will help boost real gross domestic product (GDP) to about 3.4 percent this year, up from 2.7 percent last year.

Reem Saad / Doha News

Khalifa Stadium construction

In terms of advice, the body urged Qatar to explore “complementary” revenue measures, such as taxing GCC businesses.

It also warned authorities to manage liquidity pressure carefully.

Thoughts?