The UAE and Gulf Cooperation Council (GCC) countries have opportunities to boost revenues and diversify their economies by introducing new taxes, according to the International Monetary Fund (IMF). In its latest Gulf region report, the IMF recommended exploring property taxes, luxury taxes, and environmental levies to strengthen revenue generation alongside economic diversification.
To reduce reliance on oil revenues, GCC nations have already implemented measures like value-added tax (VAT), excise tax, and corporate income tax. These efforts mark a significant shift as the bloc broadens its tax base to ensure sustainable revenue streams. Furthermore, the sharp drop in oil prices over the past decade spurred a wave of tax reforms across the region.
Currently, four GCC countries—Bahrain, Oman, Saudi Arabia, and the UAE—have VAT systems in place. Meanwhile, all GCC states except Kuwait have adopted excise taxes. Notably, Oman has gone a step further by announcing plans to introduce an individual income tax. This makes it the first GCC country to make such a move. Additionally, some states have introduced a 15% minimum domestic top-up tax on multinational corporations.
The IMF emphasized that simplifying tax structures would enhance compliance and collection efficiency. Introducing taxes in oil-dependent Gulf economies has been a complex process. Governments are still developing laws, regulations, and modern tax collection systems to address these challenges.
The Fund’s report highlighted a significant gap between actual and potential tax revenues in the GCC. Compared to other emerging and advanced economies, the region’s gap is considerably larger. Therefore, bridging this gap is essential for reducing dependency on hydrocarbon revenues and achieving macroeconomic stability.
Moreover, recent discussions on corporate income tax (CIT) reforms have gained traction in the GCC. These reforms align with global changes in taxing multinational enterprises. They also reflect the region’s ongoing efforts to diversify revenue sources.
Despite regional conflicts, the GCC has demonstrated resilience. According to the IMF, the economic outlook remains positive. Strong non-hydrocarbon activity, supported by reforms, has driven overall growth. Additionally, the easing of oil production cuts and expansion in the natural gas sector are expected to bolster recovery in hydrocarbon industries. Meanwhile, the non-oil sector continues to grow steadily.
