Oil-exporting countries in the Middle East and North Africa (MENA) lost more than $340b in oil revenue from their budgets in 2015, amounting to 20% of their combined gross domestic product, according to the International Monetary Fund (IMF), Gulf News reported.
IMF Chief, Christine Lagarde, said 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.
Lagarde added that while oil-exporting countries are adapting to a new reality of low commodity prices, revenue mobilization was needed around the world, especially in the MENA region, which has relied heavily on oil for government revenues, according to CNBC. In her opinion, “these economies need to strengthen their fiscal frameworks and reengineer their tax systems—by reducing their heavy reliance on oil revenues and by boosting non-hydrocarbon sources of revenues.”
Middle Eastern governments have repeatedly said they were looking to diversify their economies away from the oil industry. In addition, six Gulf oil-producing countries (Saudi Arabia, Kuwait, Bahrain, Oman, Qatar, and the United Arab Emirates) are planning on introducing a sales tax for the first time and countries like the UAE have removed long-standing fuel subsidies. Still, the aforementioned countries do not have a system of personal income tax, something that Lagarde said was needed.
The path towards income taxes could be eased by the introduction of a sales tax, a greater emphasis on corporate taxes and investing in a tax administration that could “eventually allow for the introduction of personal income taxes,” according to Lagarde.