Gulf Cooperation Council nations are planning a radical shift in tax policy, with the United Arab Emirates and Qatar as early adopters of a new value-added tax (VAT) that will be rolled out by 2018, and Kuwait, Saudi Arabia, Oman and Bahrain planning to implement the tax within two years.
News of the pending tax policy is shaking up the accounting market, as businesses scramble to secure the personnel they will need to complete paperwork, including capturing all of the tax they are owed on individual transactions.
A June 27 press release shows a scarcity of professionals with the acumen to help businesses comply with VAT paperwork requirements, for example, applying VAT policies to different parts of a supply chain.
EY is one of four “big 4” accounting houses, including PricewaterhouseCooper, which are doing additional hiring in order to keep on top of advising business clients in the region.
“Staff with the requisite skills in VAT are in short supply, as businesses in the region are also competing for new recruits from a limited pool of expertise.” EY Indirect Tax Leader Finbarr Sexton said in a press statement. “In the past, new recruits were sourced from markets such as India and Egypt to meet the skills gap.”
“However, with these two countries also in the middle of VAT initiatives, the availability of staff from these markets is in short supply as well.” Sexton said, explaining that the up-scaling would likely happen in two phases - first, companies looking for people who will apply VAT documentation to the organization’s supply chain and implement collection, and “phase two,” where companies will look for people with other types of compliance related skill sets.
Matt Walsh, vice president of tax at Sovos Compliance and a member of the Technical Advisory Group of the Organization for Economic Co-operation and Development (OECD), has drafted model legislation for the taxation of cross border services in VAT regimes.
Walsh told the Gulf News Journal on Tuesday that although these countries never had a VAT tax in place, they're now making the move, in some part responding to low oil and gas revenues as well as the burdens of higher debt levels.
“They saw the writing on the wall.” Walsh said, adding that the new tax gives the nations a “head start” on keeping coffers full.
As for the impact on business, Walsh said companies will have to look at how they get reimbursed for each part in a chain of transactions. Companies, he said, may pay tax as part of B2B or wholesale transactions and get reimbursed later as they collect from consumers.
“They’re actually collecting the money along the way, so that the government gets the money sooner.” Walsh said.
A VAT, Walsh said, is supposed to be cost neutral for a business; however, he added, companies might find themselves in trouble if they are unable to secure the right counsel and staff to track VAT well.
“They've never had to deal with a consumption tax before.” Walsh said, citing a usual learning curve for handling documentation and policy.
Experts estimate 5,000 jobs will be created in order to handle the new tax.