GCC countries should consider broad-base tax use - IMF.
KUWAIT, Jan 25 (KUNA) -- An International Monetary Fund (IMF) official said Monday Gulf Cooperation Council (GCC) countries should consider expanding use of broad-base taxes due to fiscal pressures stemming from low oil prices. Mario Mansour, Deputy Chief of Tax Policy Dvision of IMF's Fiscal Affairs Department, said revenue diversification could help dampen impact of oil price volatility on fiscal management, thus improve fiscal sustainability. Mansour explained that although these were key reasons for rethinking role of oil and non-oil revenue in fiscal management in the six-state GCC, there are other reasons for which GCC countries need to consider expanding the use of broad-base taxes. He was speaking in a symposium on tax policy reform challenges in the Arab world, held jointly by IMF Middle East Center for Economics and Finance (CEF), and Kuwait-based Arab Fund for Economic and Social Development (AFESD). Mansour said building tax capacity now was a good investment for the future when taxation would become the main revenue source for government financing. He said revenue diversification could help improve inter-generational equity by leaving more resources from oil for future generations, and making current generations contribute a fair share of tax payments for public services that they benefit from. Mansour noted that certain forms of taxation, such as property taxes, have little adverse impact on economic activity, and can be effective financing sources for municipal governments. Expanding taxation of profits to GCC enterprises, he said, reduced discrimination against non-GCC enterprises, and ensured that GCC enterprises contributed a fair share of their profits in taxes in return for the benefits they derived from government policy. Mansour talked about reform options for non-oil countries in the region. He noted that tax systems could be simplified and made more neutral. Policy options to achieve this include reducing the number of Valued Added Tax (VAT) rates to no more than two, rationalizing the use of excise taxes, rethinking the role of tax incentives in economic development, and reducing differences in the taxation of investment income. Non-oil countries also have ample room to improve tax systems equity by increasing the basic exempt amount, reducing the income threshold at which top income tax rates apply, and reconsidering use of VAT low rates and exemptions to achieve social policy objectives, he said. (end) fnk.bs
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