Tax reforms in the GCC countries are showing positive results according to Kristalina Georgieva, the Managing Director of the International Monetary Fund (IMF). She emphasized the need for further progress, especially in corporate tax reforms, citing the global minimum tax initiative as an opportunity for the GCC to implement broader reforms. In recent years, GCC countries have introduced new taxes such as VAT, corporate tax, and excise tax, albeit still remaining among the lowest globally. The UAE introduced a 9% corporate tax in June 2023 and earlier implemented a 5% VAT and Excise Tax on certain products. Saudi Arabia raised its VAT to 15% in 2020 as part of the GCC-wide framework, and Bahrain announced a 15% minimum corporate tax on multinational firms starting January 2025.
Georgieva also stressed the importance of regional integration and reduction of non-tariff barriers to unlock the potential for the GCC countries. Furthermore, she highlighted the need for fiscal consolidation in the region to build sufficient savings for future generations, including rationalization of public expenditures by reducing energy subsidies. This, in turn, could create space for targeted support to vulnerable populations and pave the way for priority public investments aligned with economic diversification goals. The IMF chief praised the competitiveness of four GCC countries among the top 30 globally but called for accelerated diversification efforts and effective risk management amid ongoing reforms.
Despite various challenges, including oil price fluctuations and production risks, the GCC region remains resilient with low unemployment, contained inflation, and positive growth outlooks. Georgieva mentioned that the GCC growth is expected to rebound in 2024 and reach close to 4% in 2025 as oil production cuts are phased out. However, she cautioned about risks associated with oil price fluctuations and production impacts on the non-oil economy. The IMF chief also highlighted the importance of a smooth landing for the world economy, pointing out that emerging Asia is a key engine of global growth, albeit constrained by conflicts and disruptions in various regions.
Georgieva expressed concerns about the mediocrity of global growth in the medium term, citing persistent headwinds faced by many countries in achieving sustainable growth. She underscored the uncertainty surrounding the global economic outlook, especially in terms of monetary and fiscal policy choices that will shape the future of the world economy. The IMF chief warned against protectionism risks that could raise trade and production costs, further complicating the economic landscape. As such, she emphasized the need for collaborative efforts and strategic policy decisions to navigate the challenges and maintain a stable and prosperous global economy in the coming years.
