Dubai has hosted two important conferences this week: the World Government Summit and the Second Arab Fiscal Forum. The summit has a broad agenda, shaping the future of government around the world. The theme of this year’s Arab Fiscal Forum, organised by the Arab Monetary Fund and the IMF, was focused on Revenue Diversification in the Arab World: Challenges and Opportunities.

Christine Lagarde, the managing director of the IMF, addressed both events. A common thread between the summit and the forum has been the strides being taken by the UAE and other governments in the region to put in place governance structures that lead the way in an “e-oriented” and digitised world.

Delivering the opening keynote speech at the forum, Ms Lagarde gave an overview of the global economic situation. She revealed that “after many years of feeble growth, the IMF is expecting global economic activity to pick up this year and next, and across both the advanced and emerging economies”. She then went on to sound a clear note of caution about global uncertainties, in the face of which her key message was that “countries need to build resilience” through robust public finances with reliable revenue streams.

Ms Lagarde went on to highlight (1) tax policy reform, (2) integrating tax policy and revenue administration reforms and (3) drawing on IMF experience as a reform partner as essential elements in building resilient economies. She referred specifically to the work of GCC states to introduce a harmonised VAT in 2018 when discussing key tax reform priorities.

Under the second head, she spoke of the need to simplify tax codes and regulations and identified the need to upgrade people’s skills and technical resources to improve tax compliance and enhance services to taxpayers.

Warming to this theme, she continued: “This is where your countries can take advantage of technological innovations – to ‘leapfrog’ into the digital age.

“Modernising the IT infrastructure – as we see in Saudi Arabia and elsewhere – allows for easier filing and payment by taxpayers, including through mobile technology. It also improves the ability to verify compliance using third-party data.

“Another good example is the GCC customs union, where technology has helped collect and administer the common external tariff.”

During a podium conversation at the World Government Summit, Ms Lagarde paid tribute in particular to the UAE for being “deliberately willing to put in place a VAT”. She expressed the hope that the system “will be simple enough and digital enough – because you start from scratch and can be innovative in that respect – so that it works”.

Her reference in both her keynote speech and podium conversation to the importance of digital technologies in the context of tax administration and compliance is timely.

Over the past five or six years, several countries have trialled the use of new technologies in the context of VAT administration and compliance. In 2011, South Korea introduced a system of mandatory electronic tax invoicing. China’s Golden Tax Project also relies on e-invoicing (Fapiao) and centralised invoice matching. Other innovative uses of new technologies can be seen in VAT reforms introduced in Portugal (eg use of certified tax software in high-risk industries) and Hungary (the Ekaer electronic trade and transport control system).

The UAE is ideally placed to play a leading part in the digitisation of government services, not just in relation to the electronic filing of VAT returns and its administration, but in relation to other fields such as e-education and e-health care.

The UAE has a young demographic and the Millennial generation is tech-savvy. Whether one measures that knowledge and aptitude according to internet use or smartphone penetration, e-influence is being felt across the Emirates.

In June 2016, Mohamed Alabbar, the chairman of Emaar Properties, gave a lecture as part of a series hosted by Sheikh Mohammed bin Zayed, Crown Prince of Abu Dhabi and Deputy Supreme Commander of the Armed Forces. Sheikh Mohammed, like Mr Alabbar, recognises the importance of digitisation. As Mr Alabbar said during his lecture: “the UAE has made huge progress in this field and is way ahead of other Arab countries, thanks to the wise policy pursued by wise leaders”. He also said that the UAE has already fulfilled the prerequisites for the digital age of “taking great interest in the development and quality of education, legislation and infrastructure”.

Digitisation in the private sector in the Emirates is proceeding apace, from the appointment of chief digital officers, through the funding of incubators and tech start-ups to the formation of “Millennial-only” companies, employing only under-25s. To quote Mr Alabbar again: “The digital path is a path that we have to open up. We have to be involved.”

Information is critical to the success of innovation. If the new GCC VAT system is to be “digital enough”, the message (and the means of responding to that message) will need to be widely understood.

The exact form of this innovation remains to be seen. The GCC Unified Agreement on VAT (GCC UAVAT) has yet to be published. The gazetting of national VAT laws and implementing regulations in each of the GCC countries is also awaited.

It must also be remembered that there are several categories of individual who will need to participate in this innovation. The national tax authority will need to establish and roll out the necessary procedures. Businesses that are tax-registered will need to understand how to operate those procedures, doubtless in conjunction with tax advisers who will also need to be familiar with such arrangements. In the event of disputes arising between the national tax authority and taxable persons over the incidence of tax, lawyers and judges will also need to acquire specialist knowledge and sufficient competence to enable such disputes to be accurately formulated, argued and resolved.

The GCC’s VAT process is making significant steps forward. However, the words of Winston Churchill, albeit spoken in a very different context, come to mind. This is not the end. It is not even the beginning of the end. It is, at most, the end of the beginning.