Three-quarters of GCC firms have yet to engage with their tax advisor on the subject of value-added tax (VAT), a study claims.
A survey showed that the vast majority – 88 percent – of respondent firms have not made budgetary provision for VAT, despite analysts predicting it will increase costs for businesses and add at least 2 percentage points to inflation in 2018.
The survey of 330 company representatives by Thomson Reuters and the Association of Chartered Certified Accountants (ACCA) revealed Gulf firms are woefully unprepared for the introduction a 5 percent GCC-wide VAT next year.
As well as finding that only a quarter of firms had engaged with a tax advisor on VAT, despite this being “crucial in any VAT implementation project”, the survey found that just 12 percent of organisations had budgeted for VAT implications in 2017.
Among the clear majority that had not, 16 percent said they had not thought about their VAT plans yet, 7 percent said they believed VAT would not impact them, and 68 percent said they had not made budgetary provision for VAT “because they were waiting for further clarity on the framework”.
The report also said there were many organisations in the GCC that still need to address the ‘VAT readiness’ of their technology platforms and tools.
Less than one-third (29 percent) of the companies surveyed had an IT platform in place capable of supporting VAT implementation, according to the report.
Meanwhile, 18 percent of respondents said their platforms were only partially VAT-ready, and 8 percent said they were challenged by older legacy systems that do not support the ability to build VAT logic.
When asked how they plan to manage VAT, half of respondents said they plan to handle it in-house by establishing an internal tax function, 36 percent planned to co-source by establishing an internal tax function and using an external tax advisor for certain processes and functions, and 13 percent plan to outsource their entire VAT reporting obligations to a VAT advisor, the survey showed.
The respondents were from a range of industries, including financial services, oil and gas, manufacturing and retail.
Thomson Reuters and ACCA urged Gulf firms to take immediate steps to become more VAT-ready – including allocate budget for VAT and its associated costs; engaging with a tax advisor, understanding their VAT compliance requirements and legal obligations, and identifying potential IT system gaps for VAT implementation, and upgrading systems where necessary by January 1.