GCC governments focus on service fee reform

Learned a lot lending an editorial hand here:

Trends: The International Media on Arab Affairs, July 18, 2023

by Paolo Pigorini and Talal Salman

WAM File

DUBAI, UAE — As GCC governments have sought to fund a plethora of services over decades, fees for hotel stays, roads, medical licenses, and other things have proliferated into a tangle that does not serve governments, businesses, or residents well. In many cases, fees have unintentionally become a long-term tax on GCC businesses and residents. Sometimes, the fees have undermined their intended purpose as a cost recovery tool for the provision of a service. For instance, toll roads have become a hidden tax as the tolls collected exceed the cost of the road’s construction and maintenance.

Moreover, different ministries and agencies impose and set fees — hampering attempts to rationalize them and avoid unintended consequences. For example, imposing and raising fees on family members who accompany migrant workers to the GCC can raise revenues. Yet these fees can cause migrant workers to keep their families in their home countries, thereby depriving GCC economies of wages and consumption that instead leave the region as remittances.

GCC governments have become increasingly aware of the problems associated with service fees as part of fiscal reforms. Leaders noted when the IMF recommended phasing out burdensome and regressive fees, and exploring alternative revenue models more conducive to small- and medium-sized enterprise development. GCC governments have seen how Hong Kong, New Zealand, and Singapore are reviewing their fees constantly and systematically to ensure that they are business-friendly, not unduly burdensome, and connected to policy objectives. At least for the past decade, Singapore has been introducing initiatives to reform its fees in terms of types and levels, with mechanisms to set, review, and update them. The result: lower business costs, enhanced fee transparency, and a reduced administrative burden on the government. (Read the rest here.)