ME PoV Summer 2021 issue

On recovery and reality checks

It is a new, post-Covid world we live in. And while the pandemic is still a way away from being totally eradicated, we are on the road to recovery. We are starting to get a glimpse of what this new reality will mean and for some, it is certainly not business as usual. As economies dust and recover, businesses operating in the Middle East are having to face hard realities.

Perhaps one of the best indicators of recovery is the Dubai real estate market. Reeling from the mandatory lockdowns and movement restrictions that hit a sector already recovering from the 2009 global economic slowdown, the Dubai real estate sector is showing signs of recovery again. Faizan Ahmed and Samina Rangoonwala look at the indicators in their article entitled Out of the Shadow. “With the world slowly opening up,” they write, “the sector is now showing signs of recovery.” They add: “With all these indicators, the recovery of the real estate sector across the UAE will be dependent on the confidence of potential investors. Data for the UAE in Q1 2021, particularly the Dubai real estate market, already shows an upward trend compared to Q1 2020 i.e. pre-COVID and Q4 2020.”

Good news. But with recovery come the reality checks. One effect of the pandemic on economies of the GCC has been declining potential revenues from oil. As such, write Mohamed Serokh, Hesham Lotfy, Joy Mukherjee, and Mohammed Abu-Hijleh “there is mounting pressure on tax authorities to collect tax revenues in order to fund government expenditure and balance budget deficits.” And who says tax, says audit.

In their article Transfer Pricing Audits in the GCC: Myth or hard reality?, the authors write that “Multinational Enterprises (MNEs) operating in the GCC are facing up to the harsh reality of TP audits [which will also translate] into many cases being litigated in courts of each respective country.” 

Taxation is an issue that has been a subject of Middle East boardroom discussions for a while now and is starting to materialize. As Abi Man Joshi says in his article The law of minimums, in which he discusses how the introduction of new global minimum tax rate of 15 percent may impact large and profitable multinationals doing business in the Middle East: “While this may not be implemented in the immediate future, all indicators point to it being a matter of “when” and not a matter of “if”.” What will the impact be on businesses in the region?

For his part, Fernand Rutten looks at the growing role and importance of customs in the GCC in his article Taxing duty. Rutten says: “For businesses operating in the GCC, being compliant means access to faster customs processes, allowing the maximum use of trade facilities […] it is of utmost importance that businesses understand their customs and trade processes, know their duty and tax burdens, set up and control the right data to ensure compliance.”

On the subject of compliance, Muzzi Ebrahim and Saad Qureshi write about the importance of implementing effective controls against financial crime and ask:  Do you know your FinCrime exposure? “With an estimated cost of US$11 trillion, a future estimated loss of US$10 trillion in earnings and with the world economy shrinking by 4.3 percent in 2020, no country can afford capital flows being restricted or the cost of doing business going up due to financial crime concerns,” they write.

One post-Covid world reality is that the digital world is here to stay. Customer experience has evolved and with it, the priorities of the Chief Digital Officer. In his article Rise to the challenge, Dr. Ahmed Hezzah says: “It is time for CDOs in the Middle East to lead the transition in their companies and organizations, and foster innovation and agility throughout all aspects of their digital transformation journey in order to drive economic prosperity and growth.“

Here at the Middle East Point of View, we wish all our readers a safe recovery and future prosperity and growth. We hope you enjoy this issue.

ME POV editorial team

Out of the shadow:The UAE real estate sector displays signs of recovery

The UAE real estate industry was one of the worst affected sectors during the 2009 global economic slowdown. Pre-pandemic, the industry had matured and sector experts expected the real estate sector to stabilize in anticipation of Expo 2020. However, the arrival of the pandemic has since taken a toll on the recovery of the sector, with mandatory lockdowns across the globe and movement restrictions that led to a further strain on the industry. With the world slowly opening up, the sector is now showing signs of recovery.

Click here to read the full article

Transfer pricing audits in the GCC:Myth or hard reality?

With the pandemic affecting all GCC economies already facing declining potential revenues from oil, there is mounting pressure on tax authorities to collect tax revenues in order to fund government expenditure and balance budget deficits. Within this context, Multinational Enterprises (MNEs) operating in the GCC are facing up to the harsh reality of TP audits. Or are they? And if so, what information is usually sought by the tax authorities during such audits? How do they use and interpret the information submitted during such TP audits? 

Click here to read the full article

The law of minimums

Out of 139 IF members, 130 members endorsed the introduction of a new global minimum tax rate of 15 percent. It is fair to say that the current global tax landscape has substantially changed from what it used to be 10 years ago. Today, we live in a connected world where decisions taken in one jurisdiction can potentially have tax impact in other parts of the world. 

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Taxing duty

The growing importance of customs in the GCC

The importance of government revenue collected from customs duties is increasingly important for most, if not all, markets within the GCC. Unsurprising, since the International Monetary Fund (IMF) estimated a loss of US$270 billion in revenues for GCC countries due to the sharp decline in oil prices exacerbated by demand loss from the Covid-19 outbreak. 

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Managing your financial crime risk

The Financial Action Task Force (FATF) assesses a country’s level of implementation of its recommendations on an ongoing basis, providing an in-depth description and analysis of each country’s system for preventing criminal abuse of the financial system. Getting an adverse FATF review has serious economic and social consequences for a country as it has the potential to restrict capital flows and increase the overall cost of doing business in the country.

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Rise to the challenge

As one of the fastest-growing economies in the world, the Middle East also engulfs the world’s youngest population — that is expected to reach 580 million by 2030 — is the largest repository of oil and gas, runs four out of the ten most significant sovereign wealth funds in the world, and is currently one of the top ten holders of US treasuries

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