Mandating the Highest Income Tax in the Arab World

The Studies & Economic Media Centre (SEMC) has criticized tax legislations against the telecommunication sector in Yemen as unfair. In a press release, the center said that raising income tax to 50% made it the highest income tax in the Arab world.

The new income tax law, recently endorsed by parliament, lowered income tax for commercial and industrial activities to between 15 and 20%, depending on the sector, in comparison with 35% previously. In stark contrast, however, it raised the income tax on telecommunication companies to 50%.

The center said that the parliamentary amendments of income tax law were unnecessary and detrimental in regards to telecommunication companies (in both public and private sectors), and would stifle the sector’s growth and development.

The release included many countries that promote development of the telecommunications sector, but do not mandate increasing income taxes because raising taxes on any commodity or service affects the returns of the sector and companies, which negatively impacts the revenues of the State’s general budget.

“The authorities should have taken decisions that contribute to support this sector for continuation of success, and to enhance its competitiveness locally and globally,” the press release state.

“Some states have issued decisions exempting the export services of the sector from income tax; including exemption of all profit export services from income tax for the coming years as well as exempting the companies providing fixed wireless telecommunication services from paying hefty annual returns,” the statement added.

Parliament has demanded a review of income tax legislation and is looking at decreasing the percentage to 30%, which was outlined in the governmental draft legislation presented to parliament.

Telecommunication companies have demanded equal treatment from the government and that income tax be reduced to 20%, so that they are in line with income taxes from other sectors.

Draft legislation, currently being presented to parliament, hits the telecommunications industry even harder, and mandates a percentage of the total annual operational revenues of telecoms companies go towards a new authority entitled “Telecommunications Authority.”

The release stressed that the telecom companies are supposed to top the list of companies which are regular in paying taxes due to the high volume of growth in this sector.