Saudi Arabia: Ibrahim Mohamed Al-Mofleh's tax take on Saudi Arabia
17 June 2014
Posted by: Author: EY Tax Insights
Author: EY Tax Insights
As Saudi Arabia seeks to diversify and modernize its economy, creating a modern tax function has been one of its core strategic priorities. Leading this change is Ibrahim Mohamed Al-Mofleh, Director General of the Saudi Arabian Department of Zakat and Income Tax . Recently he spoke with Tax Insights about the trends and challenges ahead.
Tax Insights: Recent years have seen a range of reforms aimed at modernizing Saudi Arabia’s business environment. What has been the main goal here?
Ibrahim Mohamed Al-Mofleh: As globalization continues to gather pace, the economies of the Middle East are becoming more deeply integrated into the world economy. And Saudi Arabia is among the countries taking steps to modernize its business environment and attract foreign investment.
One of the core goals has been to support wider efforts to diversify our economy by providing a stable and competitive business environment for both local and foreign businesses.
We have made significant progress here already. Overall, we are now ranked in the top 25 countries globally, according to the World Bank’s annual Doing Business rankings, and are showing improvements every year. In particular, when it comes to paying taxes, we are ranked 3rd out of 185 countries in 2013, up from 10th in 2012.
This highlights the significant efforts we have invested here, from creating more advanced online platforms for individuals and businesses to handle their business and tax administration, through to an increased emphasis on skills development within our administration. There’s a lot going on in the DZIT, which is also responsible for auditing "Zakat” or charitable giving.
"Tax reform is a key element of the Kingdom’s modernization drive, with a series of emerging trends that are changing the tax environment here.”
Ibrahim Mohamed Al-Mofleh, Director General, Department of Zakat and Income Tax, Saudi Arabi
Related to this overall success, there has been a spate of tax-related activity, from cutting corporate tax rates to signing new tax treaties. What has been the core of your focus in all this?
Tax reform is a key element of the Kingdom’s modernization drive, with a series of emerging trends that are changing the tax environment here. As head of the Kingdom’s income tax department, I understand that these developments carry great significance for businesses that already operate and pay taxes here, as well as those that plan to do so in the future.
Related to all this, we continue to work to build capacity in our tax administration, while also fostering closer cooperation with other Gulf Cooperation Council (GCC) states on tax issues. We have been highly focused on applying agreed tax treaties, while also working to ensure more tax cooperation internationally.
I also expect further refinement of our legal and regulatory environment to make it more compliant with international standards on transparency and tax-related information exchange. Similar types of efforts are also under way across most of the other GCC countries, so these trends are common across much of the rest of the region too.
We understand that all of this is vitally important for both current and future taxpayers. Solid tax reforms help reduce taxpayers’ compliance costs and enable taxpayers to benefit from our tax treaties. All this provides an environment that is more conducive to foreign investments, which is one of our core aims here.
How are you seeking to change the way that the private sector and other taxpayers interact with your department, for example, through electronic filing?
We have already seen many changes here. All taxpayers have, for some time, made their payments through a government electronic system called Sadad, which is linked to our internal information systems. Our website provides additional information, from instructions on how to register and file for tax through to payments, objections and appeals.
We have also launched some important interactive services, such as taxpayer account statements and the ability to amend and send back returns by taxpayers.
How is technology helping your department to facilitate increased tax compliance and administration?
To start with, we have a unique number that has been issued to each taxpayer, which helps us identify relevant individuals and exchange data more easily. DZIT has also implemented a fully integrated, internet-based system, which is linked to the Government’s Sadad system.
This allows taxpayers to make payments using a wide range of channels. We are also connected to the "Takamul” channel that connects all government agencies, which expedites data exchange between government agencies. Beyond this, we continue to work to make our website as interactive as possible for taxpayers, as part of our broader efforts in this domain.
How much of a challenge has it been to find the relevant talent needed to support all of these changes?
The changes and developments in our systems and operations have certainly affected the skills we need going forward. At a basic level, all employees have to be sufficiently technology adept, while an expanding local economy means that we need to work harder to compete for the skills we need. As far as tax professionals are concerned, it is a known fact that professional administrators are very rare, so most countries are seeking to try and develop their own tax professionals.
How appealing is a career in tax for young people today, and how is this changing at the moment?
I believe the appeal of a tax career for young people today has been growing in recent years. This reflects the importance of tax administrations to their countries as a source of revenue, as well as the high profile and attention that tax has been receiving in recent years. Added to this, the removal of customs barriers and the need to diversify and expand the Government’s revenue base has made the importance of tax administrations even greater today.
Furthermore, globalization, with more international transactions and tax treaties, has added a far greater international dimension to tax administrations, which is appealing to young people. Modern tax administrations are also employing advanced IT systems, which helps put them on a more equal footing with the private sector.
All of this is helping boost the appeal of a tax career to young people, and we are working hard to compete for them by providing a dynamic environment in which to work in the years ahead.
This article first appeared on taxinsights.ey.com.