Gulf countries are showing ‘less’ progress towards pushing oil & gas | Business and Financial Issues

A recent report from Moody’s credit bureau found that although it wants to divert more resources to the Gulf away from oil, the results have been ‘less’ and efforts to be forced because of lower oil prices.

Time is running out for the Gulf economy to stop using oil, as more and more countries around the world are pouring their weapons to support green energy transformation and the future of carbon.

But a report released Monday from the Moody’s credit union found that although the Gulf Cooperation Council (GCC) had announced its intention to tolerate bad practices, economic efforts have only had a small effect “, and progress could be reversed by oil prices and many plans aimed at non-oil groups.

“While we expect the temporary change to end, it will be offset by a reduction in operating costs in low-cost oil and competition between the GCC in the few affected areas,” Moody’s said.

The credit bureau said that plans to increase hydrocarbon power in the region, including “government’s commitment to zero or lower taxes”, did not mean that the Gulf would reduce its dependence on oil prices.

The relationship between taxes and cross-border

Although there are differences between the GCC countries, the group is known around the world for its use of hydrocarbons in terms of generating revenue and filling government funds.

Oil and gas production accounts for 45% of Kuwait’s economy in 2019, about 35% of Qatar and Oman, and nearly a quarter of Saudi Arabia and the United Arab Emirates’, the report said. Bahrain was the only GCC country where hydrocarbons were less than 15% of the money before that.

Hydrocarbons also make up the bulk of the government’s revenue from Bahrain and the UAE by taking more than 50% of government revenue from oil and gas, with Kuwait, Qatar and Oman showing strong reliance.

“This is due to the commitment of governments to the GCC to avoid taxation or low-income areas, which are part of the partnership between the authorities and citizens and which clearly shows a desire to strengthen the non-oil and development sector,” Moody said.

As the report shows, the main differences between the GCC and other countries that rely heavily on oil and gas are “temporary direct taxes” including personal and property taxes.

Oman is the only one to have written a demonstration of personal taxes, saying it is studying the establishment of one, but it only works for the wealthiest people. Saudi Arabia’s President Mohammed bin Salman said in a recent interview that no personal taxes would be levied on the monarchy.

Four GCC countries have introduced value-added tax, or VAT, with Oman the last to pay taxes in April.

Turning forward

One of the largest diversification efforts in the Gulf could be to meet the growing demand for oil and gas, which Moody says he wants to create low-cost industries such as petrochemical and plastics.

The report also suggests that the plans could reflect hopes that as the sun sets on oil, countries facing higher production costs and other GCC regulatory issues will leave a large portion of the remaining hydrocarbon pie to the Gulf.

Given oil and gas plans and the lack of political means to pay taxes, Moody says if oil prices could be around $ 55 a barrel, hydrocarbon production should “remain the only contributing factor to GCC’s GDP, a major source of government revenue. economics for the next ten years ”.