IMF Working Papers

A New GCC Fiscal Era – A Look at the Macro and Firm-Level Impact of Tax Reforms

By Anja Baum, Dorothy Nampewo, Greta Polo

April 11, 2025

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Anja Baum, Dorothy Nampewo, and Greta Polo. "A New GCC Fiscal Era – A Look at the Macro and Firm-Level Impact of Tax Reforms", IMF Working Papers 2025, 074 (2025), accessed May 13, 2025, https://doi.org/10.5089/9798229006804.001

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Disclaimer: IMF Working Papers describe research in progress by the author(s) and are published to elicit comments and to encourage debate. The views expressed in IMF Working Papers are those of the author(s) and do not necessarily represent the views of the IMF, its Executive Board, or IMF management.

Summary

In 2014, the collapse of global oil prices and the resulting increase in fiscal deficits and debt triggered a wave of spending cuts, tax policy and subsidy reforms. The introduction of excises and VAT, broadening of CIT, and subsidy reform have changed the GCC fiscal landscape. Little is known on how those recent changes have been impacting the economy. This paper first highlights the fiscal history and current fiscal landscape across the GCC. It then utilizes both macroeconomic and firm-level financial data to analyze the impact of tax policy reforms on economic and firm-level outcomes using panel data techniques. The paper finds that the different reforms have had a minor impact on GDP growth, inflation, and other economic variables, while the impact on firms is more nuanced. VAT is not found to impact firm financials, suggesting well-functioning VAT refund systems. Changes to CIT, however, have some impact especially on smaller companies, while the impact of excises depends on analyzed subgroups. The emerging picture suggests that tax policy reforms have had an overall rather small impact on the GCC economies, but care should be taken in exact policy design.

Subject: Corporate income tax, Excises, Income and capital gains taxes, Oil prices, Prices, Taxes, Value-added tax

Keywords: ANNEX I. GCC tax incentives, Corporate income tax, Eastern Europe, Excises, Firm financials, Firms times years data, GCC, GCC firm, Global, Income and capital gains taxes, Oil prices, Tax policy reform, Tax reform, Value-added tax

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