Middle East Economy Watch

April 2021

Rethinking the role of expats and tax as we look beyond COVID-19

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A year since the outbreak of the coronavirus, and it remains a material factor in daily life and economic trends here in the Middle East. Despite a new wave of infections this year, the rollout of vaccinations offers hope that the end is in sight and a recovery in the oil price - faster than most analysts expected - has provided further impetus.

However, the last year has changed our region, just as it has changed the world, and some of this will persist. In this issue, we look at two trends in the GCC which predate the crisis but have been amplified by it, as diversification becomes more important than ever: expats and taxation.

A loosening of the sponsorship system in the Kingdom of  Saudi Arabia and a new program of naturalisation in the United Arab Emirates are two examples of these trends. The pandemic has led to a sharp outflow in expats, mainly because of lost jobs, but many GCC states are looking at ways of retaining and attracting them, particularly those who can make the largest economic contribution.

Part of that contribution is increasingly coming in the form of taxation, mainly indirectly. This is happening as the GCC is trying to diversify its revenue base in response to the energy transition. We estimate that the regional tax take more than doubled between 2016 and 2019 to 5.2% of GDP. However, there is a wide range between states, from 0.5% of GDP in Abu Dhabi, even with VAT, to 7.4% in KSA, as nations explore different options for diversification.

The growth in taxation is coming from new kinds of tax as well as higher rates, and more is to come, including personal income tax in places. However, the GCC will still retain one of the lowest and simplest tax burdens globally and exemptions are being made to support competitiveness. Tax policy can also be used to support development goals, as with the Saudi white land tax.

Given its importance, in this edition we have dedicated a section to the ever changing landscape of tax in our region.

Contact us

Hani Ashkar

Hani Ashkar

Middle East Senior Partner, PwC Middle East

Tel: +971 4 304 3100

Stephen Anderson

Stephen Anderson

Middle East Strategy and Markets Leader, PwC Middle East

Tel: +971 4 304 3100

Richard Boxshall

Richard Boxshall

Middle East Senior Economist, PwC Middle East

Tel: +971 4 304 3100

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