The Middle East region (MER)has fewer and less complex tax laws in the world, according to Paying Taxes 2012, an annual report issued by PwC, the World Bank, and IFC. The subject of taxation in MER continues to generate a great deal of interest especially as tax laws continue to evolve and expand. Now in its sixth edition, the report compared tax systems across 183 countries from a business perspective, revealing that all six GCC states fall within the top 15 countries within the ranking. The GCC countries' rankings follow: Qatar - 2nd, UAE - 6th, Saudi Arabia - 7th, Oman - 8th, Kuwait - 12th, and Bahrain - 13th. On average, there are almost half as many taxes levied in the Middle East, compared to the global average. Moreover, the time to complete tax obligations is significantly lower than the rest of the world. The findings further support the region's growth prospects and its position on the global stage. Most notably Kuwait has dropped out of the top 10. In addition, the Kingdom and the West Bank have also fallen slightly, while Yemen has improved. Many of the jurisdictions in the MER feature so prominently in the top 10 jurisdictions for the overall paying taxes ranking due to the relatively few taxes levied on the case study scenario. Indeed in locations like the UAE these taxes are limited to social security contributions on national employees. “The UAE has again been ranked in the top 10 for the ease of paying taxes,” said Dean Rolfe Tax Partner at PwC. “The Middle East has traditionally been, and continues to be, relatively straight forward when it comes to paying taxes due to the limited number of taxes that are currently levied. A key finding in this year's report highlights that when governments continue to reform their tax systems they improve their overall rankings to become more internationally competitive. Such reforms might include the ability to file and pay taxes electronically.” On a positive note, there is a growing recognition at a government level that increasing tariff rates for fees, charges and levies as well as the increasing frequency of such payments is inefficient from a revenue collection perspective also. Governments are therefore considering ways to consolidate and rationalize their revenue collection methods. The GCC adopted measures including the introduction of anti-avoidance provisions including transfer-pricing rules. In the rest of the Middle East, many jurisdictions have some level of transfer pricing law (Oman, Saudi Arabia, Lebanon, Jordan, Kuwait, and Qatar). While no other jurisdiction outside of Egypt currently has formal transfer pricing guidelines that provide specific guidance in terms of the practical application of transfer pricing law, many of these jurisdictions are expected to adopt transfer pricing guidelines in the future, thus, the compliance obligation in this regard is expected to increase. Currently, in the absence of transfer pricing guidelines in these jurisdictions, transfer pricing audits have occurred adding to the general compliance resources needing to be dedicated by taxpayers to the subject.
