During the yearly GCC ministerial conference, Kristalina Georgieva, the managing director of the IMF, underlined this while commending the development achieved but noting areas needing work. She specifically said that more has to be done to properly capitalize on this potential even if reforms like the global minimum tax plan provide a chance for the GCC to extend corporate tax changes.

Several GCC countries have lately instituted new taxes like Value Added Tax (VAT), corporation tax, and excise taxes. These actions are considered as a component of a larger effort to diversify their economy away from reliance on oil. Among the lowest rates in the world, the United Arab Emirates (UAE) set a corporate tax of 9% beginning June 1, 2023. Following earlier tax changes including VAT at 5% and excise levies on goods including tobacco, fizzy drinks, and energy drinks comes this. In 2020 Saudi Arabia also raised its VAT rate to 15%, therefore enabling the region-wide acceptance of VAT, first implemented in 2018. Bahrain has also joined this campaign, pledging to apply a 15% corporate tax on multinational companies making 750 million euros or more starting on January 1, 2025.

Notwithstanding these initiatives, Georgieva demanded more thorough regional integration to fully exploit the GCC economies. She said that lowering non-tariff obstacles will help the area become much more resilient against global economic fragmentation and strengthen its linkages to one another. She also underlined the need of changes in fiscal policy for the area, particularly in terms of saving for next generations.

Georgieva underlined how GCC nations still have to rationalize public spending, especially with regard to lowering energy subsidies. Such steps, she argued, will not only help to achieve fiscal balance but also enable focused assistance to underprivileged groups. Moreover, they would liberate money for public investments, which are crucial for forward-looking the economic diversification goal of the area.

With four of the six GCC countries being listed among the top thirty most competitive economies worldwide, the IMF has acknowledged the competitiveness of these countries. Georgieva, however, advised the area to quicken its efforts at diversification and exercise caution about possible hazards related to some of the reforms. She pointed out that even with their present achievements, changes in oil prices could lower financial buffers and affect the non-oil sector badly.

Looking forward, the IMF projects good development for the GCC area. As oil output is progressively phased out, the IMF forecasts economic growth to recover in 2024 and boost to about 4% by 2025. Driven by the ambitious reform initiatives all throughout the region, the non-hydrocarbon industry is likewise expected to be strong. Georgieva emphasized, however, that the future is still vulnerable and that changes in oil prices especially could impede development in non-oil industries.

Globally, Georgieva presented a cautiously hopeful view, pointing out that even if the world economy is landing smoothly there are still major hazards. Thanks in great part to rising demand for semiconductors and electronics, emerging Asian markets are predicted to propel world growth. Geopolitical disputes and changes in commodities production and transportation, however, could slow down development in other areas including the Middle East, Sub-Saharan Africa, and Latin America.

Georgieva also voiced worries about the long-term global economic situation since world development is still somewhat poor. Protectionist policies, she cautioned, may increase trade and manufacturing costs, therefore adding further uncertainty. She also underlined that the world economy is encountering significant headwinds since medium-term growth expectations seem to be lower than short-term forecasts.

The GCC still has great difficulties even if the IMF notes its progress in terms of economic development and tax changes. Long-term economic stability and resilience depend on ongoing reform initiatives, especially in fiscal policy and corporation tax.

GCC nations introduce new taxes: IMF urges wider corporate tax reforms

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