Country Note: The Gulf Cooperation Council (GCC) States: New Players in the International Tax Competition Game

Abstract

International tax competition is a worldwide phenomenon that is intensified by globalization which is a process that eased the movement of highly mobile businesses. This work argues that, unlike the rest of the world where tax competition has existed since the 1980s, the Gulf Cooperation Council (GCC) states’ efforts to lure non-GCC entities to conduct business in the GCC’s oil-rich states (Kuwait, Bahrain, Kingdom of Saudi Arabia, Qatar, United Arab Emirates, and Oman) have been emerging since 2000. In particular, this work examines the unprecedented shift in tax policies to halve the rates and introduce tax incentives in the GCC region. This work attempts to investigate three questions: (1) Has tax competition recently emerged in the GCC? (2) If so, who are GCC States trying to compete with? (3) What is and should be the GCC organization’s role in competition? To the best of this author’s knowledge, no literature has investigated these questions. This work is timely because GCC states have announced their official plans to further reduce corporate income tax (CIT) rates and offer more tax incentives in the near future. These are plans that ignore the ongoing global changes in tax policies that impair the success of these reforms. The findings of this work provide the foundation for future studies to debate whether tax competition in the GCC region is harmful and, if so, how to address it. Tax competition, Gulf Cooperation Council, GCC, tax incentives, tax rate.