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Have taxes killed GCC economic integration?

Saudi Arabia's recent decision to increase its value-added tax by 200% could spell the end of chances for regional economic integration and policy coordination.
An investor walks past a screen displaying stock information at the Saudi Stock Exchange (Tadawul) in Riyadh, Saudi Arabia June 29, 2016. REUTERS/Faisal Al Nasser  - S1AETMRJVXAC

June 5 will mark the third anniversary of the Gulf Cooperation Council (GCC) rift, the ongoing dispute and embargo of Qatar by its neighbors Saudi Arabia, Bahrain and the United Arab Emirates (UAE). Clearly, the GCC, as a regional organization, has been under stress for some time, with very little progress from either local mediation efforts led by Kuwait, or any forceful mending of fences led by the United States. What spells the end of the GCC may be something more benign, yet widely disliked — taxes.

Saudi Arabia's decision to increase its value-added tax (VAT) by 200%, bringing it to a 15% tax on goods and services to begin on July 1, means that there is now no chance for regional economic integration and policy coordination. That policy coordination was the backbone of the GCC, the idea that the six states could enact a uniform policy on trade with each other, and the equal treatment of citizens as investors and property owners across their borders. Since 2017, the equal treatment of GCC citizen investors has failed, at a high cost to lost investment in business and real estate.

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