The International Monetary Fund has recommended that the 5 per cent value-added tax (VAT) levied in Saudi Arabia and the UAE as part of a GCC-wide framework should be raised, saying it is low by global standards.

The IMF suggested in a country note on the kingdom released late on Wednesday that the decision should be taken following consultations with GCC countries.

“The introduction of VAT has been very successful, and consideration should be given to raising the rate from 5 per cent, which is low by global standards, in consultation with other GCC countries,” it said in the note.

The UAE and Saudi Arabia levied 5 per cent VAT on a host of goods and services from January 1, 2018, in order to bolster the revenues of the Gulf governments as part of diversification initiatives. Other Gulf countries will levy VAT at a later stage. Currently, it is one of the lowest in the world.