Abu Dhabi: Oil-exporting countries in the Middle East and North Africa (Mena) lost more than $340 billion in oil revenue from their budget in 2015, amounting to 20 per cent of their combined gross domestic product, according to the International Monetary Fund (IMF).
Pics: @HHShkMohd, in presence of @HamdanMohammed, Maktoum bin Mohammed, receives Managing Director of IMF pic.twitter.com/chopMgUFFT— Dubai Media Office (@DXBMediaOffice) February 22, 2016
Christine Lagarde, managing director of the IMF, said on Monday that supply and demand factors in the oil market suggest that oil prices are "likely to stay low for an extended period.
This will mean that all oil exporters will have to reduce spending and work on raising revenues.
"It is also worth remembering that GCC economies have made large fiscal adjustments in the past, and I am confident that they can do it again.
At the same time, these economies need to strengthen their fiscal frameworks and reengineer their tax systems - by reducing their heavy reliance on oil revenues and boosting non-hydrocarbon sources of revenues," Lagarde said.
Speaking at the Arab Fiscal Forum in Abu Dhabi, she added that such adjustments will help bolster growth and job creation and help maintain debt sustainability.
"How can GCC countries achieve this? Start by putting in place a simple system that initially focuses on VAT (Value Added Tax) - ideally a harmonized regional VAT. Even at a low single-digit rate, such a tax could raise up to two per cent of GDP," she said.
The IMF managing director added, "Add to this a greater emphasis on corporate income taxes, as well as property and excise taxes. And continue to invest in building tax administration capacity that could eventually allow for the introduction of personal income taxes."
The UAE had earlier announced that it would implement VAT by 2018, with the framework currently under discussion with other GCC countries.
