Charts & Numbers

100% Tax on Luxury Goods June 4, 2008

The Gulf Cooperation Council (GCC) is planning to introduce up to 100% tax on ‘harmful products’ & luxury goods likely to include cigarettes, luxury cars, private planes, & yachts, among others. A team has been commissioned to list items that could be liable to the new tax from 2012. The GCC team looking into the proposed taxes would next meet in October. The GCC has already set 2012 as the deadline for implementing a new value added tax system.

Each of the Gulf countries suffers from lack of productivity and sophisticated staff, including a very bureaucratic environment in the public sector. The GCC is just that multiplied by 6, therefore I doubt any decision will be made anytime in the next 20 years regarding taxation (if anything useful). 

Some notes to consider:

The rich – are the powerful – therefore taxing their latest toys will not make them very happy buying in their own countries and will therefore register items across borders. A good example would be to buy the yacht and register it in Yemen, for instance, and then take it to Dubai marina. This is a simple way to avoid taxes. This will move the companies to areas where the wealthy will pay a more reasonable rate than the 100%.

There will be an increase of ‘wastas’ (quanxi) at the ports and customs to avoid paying the tax. We are already bombarded by having to payoff officials to get the latest DVD, book or game in to the country just imagine bribing one of them to bring in a Ferrari, this will take things to a new extreme.

The Governments DO NOT need any extra income. The future plans and growth in Dubai, Bahrain, and Qatar all involve a marketing plan that clearly states ‘a tax free’ incentive for company’s & employees to relocate. Although everyone knows the slow pace of government policies any threats such as this will deter future companys/individuals from relocating.