Europe, Middle East & Africa regional interview: Deloitte
Indirect Tax Partner
Deloitte Middle East
1. What is the most significant change to your region/jurisdiction's indirect tax legislation in the past 12 months?
This has been a year of fundamental change in the Middle East region, with the release in early 2017 of the Treaty between the Gulf Cooperation Council (GCC) Member States setting the scene for the introduction of Value Added Tax (VAT). This was followed by the decision of both the Kingdom of Saudi Arabia ('KSA') and the United Arab Emirates ('UAE') to proceed with VAT implementation with effect from 1 January 2018. Deloitte in the Middle East has been directly involved to a significant degree with the implementation process both from an educational and organisational aspect in the public sector, as well as in assisting businesses in the private sector with addressing the challenges of implementation.
2. What has been the most significant impact of that change?
VAT is sometimes referred to as a "simple tax". However, the level of sophistication of businesses operating in the Middle East region has meant that implementing VAT effectively has often been a complex undertaking, affecting every aspect of their activities—from operations to supply chain, from customer and supplier contracting, to systems and accounting processes.
3. How do you anticipate that change impacting your work and the market moving forwards?
Clients of Deloitte member firms in the Middle East expect us to bring a wide range of skills and talents to them to solve their indirect tax challenges in a focused and commercial manner. Therefore, Deloitte in the Middle East has built an indirect team composed of individuals with a wide variety of skillsets, who can leverage technical strength, commercial expertise across a wide range of industries, and deep systems and technology expertise to deliver effective and pragmatic business solutions for clients in the Middle East.
4. How has this changed the way you offer tax advice?
Deloitte member firms in the Middle East have been agile and innovative in how we have delivered support and advice to clients in the context of VAT. In addition to creating a complete set of 'go to market' materials, the Deloitte Middle East member firms have delivered over 100 seminars and roundtables across the GCC region. The Deloitte Middle East client tools and enablers include bilingual e-learnings, industry whitepapers, and survey reports. Deloitte member firms in the Middle East were also the first to offer a free GCC VAT mobile App, which is regularly updated with legislative and policy developments, and which has had well over 15,000 downloads to date.
5. What potential other legislative changes are on the horizon that you think will have a big impact on your region/jurisdiction?
There are four more countries in the GCC yet to implement VAT, namely Qatar, Kuwait, Oman and Bahrain. Some countries will do this by 1 January 2019 whilst others have said they will introduce VAT a little later. There will inevitably be differences in how GCC countries implement their VAT systems, albeit based on the general framework of the Treaty.
6. What are the potential outcomes that might occur if those changes are implemented?
Ultimately it is intended that GCC countries will be able to trade with one another in a relatively frictionless manner from a VAT perspective, with intra-GCC systems deployed by governments to support this. Deloitte member firms in the Middle East await details on how this will operate in practice, with technology anticipated to be a key enabler of this.
7. Do you think that change will have a positive effect on both your practice and the wider regional/jurisdictional market?
Governments in the GCC region are increasingly looking to diversify their economies and the introduction of VAT is one key enabler of this. The revenue raised through VAT will be used by governments to fund a variety of measures aimed at benefiting citizens and strengthening GCC economies. At Deloitte Middle East, we are proud to contribute to this agenda, and have built the leading VAT public policy practice, supporting governments across the GCC region with their implementation of VAT, as well as local and international businesses. Deloitte member firms in the Middle East are investing heavily in growing our practice across the Middle East region, and recruiting locally in the GCC countries where Deloitte Middle East member firms operate, to ensure we have a strong regional Indirect Tax practice for the future.
8. How are issues surrounding the taxation of the digital economy affecting your jurisdiction?
The VAT systems introduced by the UAE and KSA have certainly taken into account the existence of the digital economy and are highly comparable to equivalent VAT systems in other mature economies, which are focused on trying to ensure that VAT is levied on the end-use of digital services, and avoids becoming a cost to businesses.
9. What legislative changes would you like to see be implemented that you think would have the most positive effect on your practice and the wider regional/jurisdictional market?
VAT is a young tax in the Middle East and there are certain areas where the law and guidance requires clarification. This is to be expected at this stage and it is reassuring that tax authorities are taking a highly collaborative approach in working with advisors and businesses to understand the impact of VAT. This helps to ensure that when clarifications are publicised, there is early understanding and adoption by businesses.
10. Do you think something like that is likely to be implemented in the near future? If not, what are the roadblocks to implementing such legislative changes; if so, how soon do you think they will be implemented and what do you anticipate will be the positive effect of those changes?
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