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Content

Abstract …………………………………………………………………….. 3

Introduction ………………………………………………………………... 4

Literature Review …………………………………………………………. 5

Research Method……..……………………………………………………. 6

Results and Discussion ……………………………………………………. 7

Conclusion ………………………………………………………………….. 10

References ………………………………………………………………….. 12
Abstract

This study aims to analyze the introduction of value added tax from the perspective of small and

medium enterprises in Qatar. The awareness among SME’s in Qatar regarding the introduction of

VAT is assessed in this paper. In addition the paper also examines the area of concerns of SMEs in

Qatar regarding implementation of VAT in their organization. The result of the study indicate that

the level of awareness is low among SME’s in Qatar. Moreover majority of the business agreed

with the probable areas of concerns in the implementation of VAT.

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1. Introduction

One the onset of the recent falling oil prices the Gulf Corporation Council countries decided to

introduce value added tax in the region. On 2015 the finance ministers of GCC countries agreed

on major issues related to implementation of Value Added Tax in the GCC region. The

implementation of a VAT regime is part of an overall initiative to help the GCC states diversify

their revenue sources. The implementation period for VAT in the GCC is expected to begin on

January 2018. As a part of this GCC wide agreement Qatar announced its plan to introduce VAT

in the country. On June 18 2016 Ministry of Development and Planning and Statistics announced

that Qatar will be introducing 5% VAT in 2018.

Due to the fact that GCC is a region where there is comparatively minimal usage of tax and tax

regulation it would be very challenging for the government to implement VAT (Reiche, 2010).

The implementation will have a major impact how business operate as the system affects all

aspects of value chain process in an organization (Tait, A. A. 1988). Systems such as IT and

billing and accounting will need to be updated according to the new requirements. Business

entities in the region will have to prepare for the reform process and ensure that it complies with

the new tax regulation.

This study is conducted on small and medium enterprises in Qatar. SMEs are considered as the

backbone to any economy in the world. Around 95% of the business organizations globally fall

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under this category. In Qatar Small and Medium Enterprises (SMEs) represent majority of the

business organizations. They play a significant role in Qatar’s private sector.

The research paper intends to answer the following research questions:

1. To assess the level of awareness among SME’s in Qatar on the VAT implantation and identify

effective ways to raise awareness among SME’s.

2. To understand the business concerns among SME’s relating to VAT implementation.

2. Literature Review

2.1 VAT

Value added tax is a form of indirect tax which was first introduced by France in 1954 (James

& Nobes, 1996). An indirect tax is levied upon the goods and services at each step of the

supply chain (McLure & Bloomfield, 1987). One of the most distinct feature about VAT is

that the ultimate payer of VAT are the end consumers rather than business. Business act as a mere

collector of the taxes by adding tax to the price of their product (Sahoo, A., 2015). The GCC

VAT system will be based on a multifunctional single market system. A common initial standard

VAT rate of 5% has been agreed across GCC. Certain industries such as social services healthcare

and education will be exempt from VAT. Basic food stuffs will be subject to VAT at a null percent

rate.

2.2 Awareness

Awareness is the state or ability to perceive to feel or to be conscious events, objects or sensory

patterns (Thorne, B. M., & Henley, T. B. 1997).In other words awareness can be defined as a

quality or state of being aware of something.


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In Hungary one of the most important issue with its welfare system was the lack of awareness of

the reform process (Csontos, Kornai, & Tóth, 1998). He argued that the when reforming

welfare system it is of utmost importance to educate the stakeholders regarding tax policies in

order to ensure a smooth implementation and transition.

In Malaysia for the Goods and Services tax to have a successful transition the government must

ensure that the taxpayers are fully aware of the system (Marimuthu, M., & Bidin Z,2016). In

this paper the author concludes that the effective implementation of GST in Malaysia will depend

on the measures that the government takes to educate its citizens regarding the new welfare

reform process

2.3 Small and Medium Enterprises

This research primarily focuses on the level of awareness and preparedness for VAT

implementation among SMEs Therefore it is of utmost importance to define the term Small and

Medium Enterprises National (SMEs).According to the National Detention of SMEs Small and

Medium Enterprises shall mean: “the companies registered in accordance with the laws of the

State of Qatar, which number of employees does not exceed two hundred and fifty (250)

employees (with exception of companies operating in the creative industries sector and which

number of labor force shall not exceed one hundred (100) employees), and which annual turnover

does not exceed one hundred (100) million Qatari Riyal.”

3. Research Method

The population chosen for the study was small and medium enterprises in Qatar. The primary data

source for this research was the data collected through interviews of fifteen small and medium

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enterprises in Qatar. All business had number of employees less than 250 and had an annual

turnover of less than 100 million Qatari Riyal. The interview conducted was semi structured in

nature with both open ended and close ended questions. The interview was divided into four

sections. The first section of the interview included questions relating to the general information

of the company. The questions included industry of the company, age of the company, annual

turnover. In the second section the questions were designed to assess the level of awareness

among companies regarding VAT implementation. The third section consisted of questions

pertaining to the business concerns company have on VAT implementation in Qatar. The fourth

section of the interview included question to examine the mode of communication between

government authorities and SME’s for information relating to VAT.

4. Results and discussion

4.1. Awareness regarding introduction of VAT in Qatar

The interviews were asked if they were aware of the introduction of VAT in Qatar. Over 70% of

the companies said that they were aware of the VAT introduction in Qatar.

Further questions were asked to assess the level of understanding among SMEs on VAT in Qatar.

40% of the respondents replied that they were aware of the reasons why government introduces

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VAT. Remarkably only 20% of the SMEs interviewed were informed about the VAT rate that will

be implemented in Qatar. However majority of the SMEs were aware of the meaning of VAT.

Around 90% of the respondents replied that they knew the meaning of VAT. When inquired about

the recent announcement from Ministry of Planning and statistics of the government’s plans to

introduce VAT eighty percent of the respondents replied that they were not aware of the

announcement. The awareness of the proposed date for the implementation was also low among

SMEs as only 20% of the companies had a positive response.

The results shows that although 70% of the respondents were aware of VAT introduction in Qatar,

further assessment on the level of understanding showed that SME’s in Qatar did not have

adequate knowledge on the details of the reform process that will take effect in 2018.

4.2 Business Concerns

In this section the concerns among SMEs regarding implementation of VAT was examined. The

SMEs were asked on the area of concern they might face during the transition period. Majority of

the respondents raised concern regarding the implementation cost of VAT during the transition

period. 95% of the interviewee agreed about the cost of implementation of VAT. Another major

area of concern for SMEs was the cost incurred in the updating of their current accounting

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system. Eighty four percent of the SMEs interviewed believed that the cost of updating their

accounting system might affect their organization. Eighty two percent of the respondents were

concerned about training and preparing their employees for the using VAT in their organization.

SMEs were also concerned about the maintenance of records in order to comply with the new tax

regulation. Over 68% of the SMEs agreed that the maintenance of records for VAT were costly

and time consuming. Moreover the ongoing operation was considered by 65% of the

organizations as an issue of concern.

The results from this section indicate that majority of the SME’s in Qatar agreed with the areas of

concerns identified in this research. The economic factor had major impact on SME’s as most of

the SME’s pointed out during the interview the implementation cost they might incur to

implement VAT in their organization.

4.3. Channel of Information

In this section the interviewees were asked what channel of information they preferred for

information regarding the VAT implementation. Majority of the respondents said that they would

prefer a special government website dedicated for VAT. Additionally they also preferred to get

information from the government through free trainings and seminars by government. Many of

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the interviewees responded that they would seek their own consultant’s advice for information

relating to VAT. Attending private seminars were the least preferred mode of information that

were preferred by SMEs.

From the analysis of the results in this section it can be concluded that the introduction of a

specialized website from the government can be an effective tool to educate the SME’s about the

implementation of VAT. Free training and seminars can also be effective in increasing awareness

among SME’s regarding introduction of VAT.

5. Conclusion

The findings from this research indicate that the level of awareness among SMEs regarding VAT

implementation in Qatar is very low. It is evident that the information about the new tax reform in

Qatar was not effectively communicated by the government to the business community. In

addition this research was able to identify some areas of concern that SME’s might face during the

transition period and implementation of VAT in Qatar. Finally, this research has provided some

insights on the best mode of communication methods that can be used in effectively informing the

public about the introduction of VAT in Qatar.

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In conclusion the introduction of VAT system in Qatar will have a huge impact small and medium

enterprises. Every single process in the value chain of an organization will be affected by this

reform. Thus it is of high priority to raise awareness and communicate with the SMEs in Qatar in

order to prepare them for the reform process. More over the implementation of the system must

be done after careful planning and taking into consideration the opinions and concerns of the

SMEs.

This study has a number of limitations. First, the Value Added Tax system was not implemented at

the time writing this research which restricted the paper to only examine the awareness of VAT in

Qatar. However the compliance of VAT system in Qatar can be examined post the introduction of

VAT in Qatar. Second, this study was conducted on SME’s based in Qatar nevertheless the study

could be applied to other GCC states.

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Works Cited

Thorne, B. M., & Henley, T. B. (1997). Connections in the history and systems of psychology.

Boston: Houghton Mifflin.

Csontos, L., Kornai, J., & Tóth, I. G. (1998). Tax awareness and reform of the

welfare state: Hungarian survey results. The Economics of Transition

Marimuthu, M., & Bidin, Z. (2016). Awareness, Attitude and Probable Area of

Difficulties towards the Proposed Goods and Services Tax in

Malaysia. International Review of Management and Marketing

Qatar Development Bank. (2015). National Definition of Small and Medium

Enterprises in State of Qatar. Retrieved from

http://www.qdb.qa/excellencelist/attach/SMEs-Definition-Booklet-

English.pdf

OECD. Small and Medium-sized Enterprises: Local Strength, Global Reach.

Retrieved 2017, from http://www.oecd.org/cfe/leed/1918307.pdf

GCC ministers of finance meet to approve introduction of GCC VAT. (2014, April

28). Retrieved January 10, 2017, from

http://taxinsights.ey.com/archive/archive-news/gcc-ministers-of-finance-

meet-to-approve-introduction-of-gcc-vat.aspx

GCC prepare for implementing VAT. Retrieved from

http://www.qatarday.com/news/local/gcc-prepare-for-implementing-

vat/39609

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Uyar, A., & Güngörmüş, A. H. (2013). Perceptions and knowledge of accounting

professionals on IFRS for SMEs: Evidence from turkey. Research in

Accounting Regulation, 25(1), 77–87. doi:10.1016/j.racreg.2012.11.001

McLure, C. E., & Bloomfield, M. A. (1987). The value-added tax: Key to deficit

reduction? Washington, D.C.: American Enterprise Institute for Public

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Sahoo, A. (2015). Goods and service tax (GST): A step towards indirect tax

reforms in India. Asian Journal of Research in Business Economics and

Management, 5(8), 58. doi:10.5958/2249-7307.2015.00159.0

Reiche, D. (2010). Energy policies of gulf cooperation council (GCC) countries

—possibilities and limitations of ecological modernization in rentier

states. Energy Policy, 38(5), 2395–2403. doi:10.1016/j.enpol.2009.12.031

Retrieved January 01, 2017, from Ministry of Development and Planning and

Statistics QATAR, www.mdps.gov.qa

Tait, A. A. (1988). Value added tax: International practice and problems.

Washington, D.C.: International Monetary Fund.

James, S. R., & Nobes, C. W. (1996). The economics of taxation: Principles,

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