Gulf Cooperation Council Current Affairs
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Saudi Arabia and United Arab Emirates (UAE) became first countries of Gulf Cooperation Council (GCC) to introduce Value Added Tax (VAT) for the first time to increase their revenue away from oil reserves. The other members of 6 member GCC– Bahrain, Kuwait, Oman and Qatar — have also committed to introduce VAT, though some have delayed plans until at least 2019.
The rate for VAT is set at 5% on the majority of goods and services including petrol and diesel, food, clothes, utility bills and hotel rooms. Number of goods and services including medical treatment, financial services and public transport have been placed in either zero rated or in exempt category.
In Saudi Arabia, more than 90% of budget revenues come from oil industry while in UAE it is roughly 80%. Organisations such as the International Monetary Fund (IMF) had long called for Gulf countries to diversify their sources of income away from oil reserves. Both countries have already taken steps to boost government coffers.
Value Added Tax (VAT)
A VAT is type of consumption tax that is placed on product whenever value is added at stage of production and at point of retail sale. It is one of the most common types of consumption tax implemented in more than 150 countries around the world. It is charged at each step of the ‘supply chain’. Final consumers generally bear the VAT cost while businesses collect and account for the tax, in a way acting as a tax collector on behalf of the government.
The United Arab Emirates (UAE) and Saudi Arabia have formed new economic and partnership group named Joint Cooperation Committee, separate from Gulf Cooperation Council (GCC).
This move that could undermine six-member GCC amid Saudi led Arab countries diplomatic crisis with Qatar as half of countries members are boycotting Qatar, accusing it for supporting and funding terrorism.
The new committee is assigned to cooperate and coordinate between UAE and Saudi Arabia in all military, political, economic, trade and cultural fields, as well as others in the interest of the two countries. It will be headed by Sheikh Mohammed bin Zayed Al Nahyan, crown prince of Abu Dhabi and Sheikh Mansour bin Zayed Al Nahyan, UAE’s deputy prime minister and minister of presidential affairs, will serve as the Deputy Chairman of the committee.
Gulf Cooperation Council (GCC)
GCC is a political and economic alliance of six countries in Arabian Peninsula: Kuwait, Oman, Bahrain, Qatar, Saudi Arabia and UAE. It promotes economic, security, cultural and social cooperation between the six states and holds annual summit to discuss cooperation and regional affairs. The Charter of GCC was signed in 1981, formally establishing the institution. Its headquarter is in Riyadh, capital city of Saudi Arabia.
All current member states of GCC are monarchies, including three constitutional monarchies (Kuwait, Qatar and Bahrain), two absolute monarchies (Oman and Saudi Arabia) and one federal monarchy (UAE which is composed of seven member states, each of which is absolute monarchy with its own emir).