EconSource: Gulf States Agree on Key Issues for Implementing VAT

Gulf states have agreed on key issues for implementing value-added tax (VAT) in the region. The agreement was reached at a meeting of representatives from Gulf ministries a few days ago, Undersecretary at the United Arab Emirates’ (UAE) Finance Ministry Younis Haji al-Khouri said. The introduction of a VAT would mark a major economic reform for the Gulf Cooperation Council (GCC) states, which have minimal tax systems and no tax on income. The drop in global oil prices has slashed government incomes and made finding new revenue more urgent. The UAE is expected this year to post its first budget deficit since 2009. Khouri said the target for introducing the tax is three years. He said it would take 18 to 24 months to implement once a final agreement has been reached. “We agreed on key issues to apply zero tax on healthcare, education, social services sectors and exempt 94 food items,” Khouri said. GCC governments have not indicated the rate at which the VAT will be levied. [Reuters, Gulf News, 12/7/2015]

Deputy PM says Turkey needs “more orthodox” monetary policy
Turkey needs a “more orthodox” and predictable monetary policy, Deputy Prime Minister Mehmet Simsek said, throwing his weight behind an effort by the Central Bank of Turkey to simplify its intricate system of multiple rates. Simsek sought to reassure investors he was committed to fiscal discipline and Central Bank independence. He said there should be more predictability in monetary and fiscal policy and said he plans to announce a roadmap for reforms this week. Simsek did not provide further details about expected reforms. He said he did not foresee changes in the “main parameters” of Turkey’s budget. He also said a worst case of “zero relations” with Russia would cost Turkey about $9 billion, underscoring the economic fallout of tensions between Moscow after Turkey. Bloomberg reported that foreign investors withdrew $7.6 billion in assets from Turkey in 2015. In other news, Moody’s affirmed Turkey’s Baa3 government debt and issuer ratings, saying that it “reflects the country’s economic resilience and strong fiscal metrics.” [Reuters, 12/7/2015]

Egypt lifts 2015-16 GDP growth forecast
Egypt revised its gross domestic product (GDP) target for the current fiscal year to 5.5 percent from 5 percent on Saturday. Planning Minister Ashraf al-Arabi said that Egypt’s economy grew 4.2 percent in the 2014/2015 fiscal year, up from 2.2 percent the previous year. “The economy has responded favorably to reform processes put in place by the government and economic stimulus measures that have injected huge additional investments into labor-intensive infrastructure projects,” the Planning Ministry said. On Saturday, Egypt said it aims to increase exports of agricultural products to Russia by 15 percent in the coming year. Meanwhile, Minister of International Cooperation Sahar Nasr said that Egypt will sign a final agreement with the World Bank for a $1 billion loan on December 19 and expects to receive the funds before the end of the year. [Reuters, 12/5/2015]

Egypt ordered to pay Israel $1.76 billion after halting gas supplies
Israel’s state owned electric utility Israel Electric Corporation (IEC) said Sunday that Egyptian natural gas companies have been ordered by international arbitrators at the International Chamber of Commerce to pay $1.76 billion in compensation for halting gas supplies. Egypt stopped selling natural gas to Israel in 2012 after months of attacks on a pipeline by militants in the Sinai Peninsula. IEC sued Egyptian providers Egyptian Natural Gas Holding Company (EGAS) and the Egyptian General Petroleum Corporation (EGPC), as well as the firm operating the pipeline, Eastern Mediterranean Gas (EMG), for $4 billion in damages. “Israel Electric will act toward the implementation of the arbitration ruling through dialogue with the gas companies,” IEC said. EGPC and EGAS said in a statement that the arbitrator had also ordered them to pay $288 million to EMG. Egyptian Prime Minister Sherif Ismail said Egypt would appeal the decision. Israeli firms Delek Group, Ratio Oil, and Isramco Negev said Monday that they would push ahead with talks to export natural gas to Egypt despite the ruling. However, the Egyptian government ordered its oil and gas arms to freeze talks on importing Israeli natural gas. The government ordered EGPC and EGAS to halt approvals to companies to import Israeli gas until it clarifies the ruling and the fate of the appeal. [Reuters, AP, 12/6/2015]

Bayda NOC reissues warning following Tripoli NOC deals
Libya’s National Oil Corporation (NOC) set up by the internationally-recognized government in Tobruk has again claimed that it is the only entity that can legally oversee the country’s oil contracts. Tobruk NOC Chairman Nagi al-Magrabi said the only legitimate office of the NOC is in eastern Libya in Bayda. Any crude shipments arranged with “any other entity” will be refused shipment, al-Magrabi said in a statement. Companies that deal with other entities will also face “legal consequences.” The statement also said the Bayda NOC is offering “lucrative business opportunities [that aim] to attract international and well-reputed companies.” [Libya Monitor (subscription), 12/7/2015]

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