June 5 will mark the third anniversary of the Gulf Cooperation Council (GCC) rift, the ongoing dispute and embargo of Qatar by its neighbors Saudi Arabia, Bahrain and the United Arab Emirates (UAE). Clearly, the GCC, as a regional organization, has been under stress for some time, with very little progress from either local mediation efforts led by Kuwait, or any forceful mending of fences led by the United States. What spells the end of the GCC may be something more benign, yet widely disliked — taxes.

Saudi Arabia's decision to increase its value-added tax (VAT) by 200%, bringing it to a 15% tax on goods and services to begin on July 1, means that there is now no chance for regional economic integration and policy coordination. That policy coordination was the backbone of the GCC, the idea that the six states could enact a uniform policy on trade with each other, and the equal treatment of citizens as investors and property owners across their borders. Since 2017, the equal treatment of GCC citizen investors has failed, at a high cost to lost investment in business and real estate.

The GCC formed in 1981 in an effort at collective security in response to the Iranian revolution, and subsequently Iraq's invasion of Iran. But security cooperation and sovereignty, particularly between monarchies, are not easily aligned. As senior researcher Jeffrey Martini and colleagues at the RAND Corporation have argued, “Within the sovereignty-sensitive GCC, economic cooperation was judged as more attainable than ceding decision-making over foreign affairs or merging their military capabilities into a truly integrated collective defense capability.”

So, in 1983, the GCC launched its Free Trade Agreement, which reduced trade restrictions between member countries and facilitated trade flows in an effort at regional coordination. In 2003, the GCC marked another step forward with the establishment of a customs union. The common market, allowing free movement of people and goods, began in 2008. Intra-GCC trade has grown nearly fortyfold since its establishment; yet, as the International Monetary Fund (IMF) has demonstrated, intra-GCC non-oil trade remains low, at only 10% of total non-oil trade in 2016. The region tends to produce the same things, so complementarities in exports and trade are low. Out of the $85 billion intra-GCC trade in 2016, the UAE accounted for the largest share, mostly because it is a re-export hub, according to the IMF.