07 May, 2008

Are you ready for VAT?

Ex-pats, get ready for VAT. The National reports,
The UAE will be ready to introduce a system of value added tax (VAT) by the end of the year.

Abdul Rahman al Saleh, the executive director of Dubai Customs, said the “infrastructure” for an Emirates-wide taxation system would be put in place between October and December.

Dubai Customs was commissioned by the Government two years ago to look into a potential VAT and is finalising the strategy. If implemented, it would be the first time VAT, which is applied to the sale of goods and services and not income, has been imposed in a GCC nation.

However, a government source said although the mechanics would be in place, it was “very unlikely” that VAT would be introduced this year because Federal approval and GCC co-operation, on several related issues, would be required.

VAT would be introduced to replace customs duties, which the UAE must phase out as part of the free trade agreements (FTAs) it is signing with a number of major trading partners, Mr Saleh said.

The government source, who declined to be identified, said a GCC-wide agreement on these FTAs is still some way off.

Mr Saleh told a seminar at the Arabian Travel Market in Dubai that VAT was likely to be set at a flat rate of between three and five per cent. It would be applied to all goods and services.

17 comments:

Editor said...

No, I am not ready to give part of my own money away.

Anonymous said...

We already face indirect taxes through Etisalat and RTA.

Editor said...

ok, I just don't want to give more than that.

hemlock said...

me thinks someone up there grew up playing SimCity.

iceman said...

Let me guess.. like everything in this country VAT will only be applied to all expats. Nationals will be exempted.!

In-depth sheet said...

Maybe they will use the funds to build more tall buildings, biggest mall...Next thing we know, there will be income tax?

Boo said...

From a reliable source Income tax in the planning stages.......dont be surprised, it is coming soon to you! And dont worry it will not be called income tax. Enjoy the 'tax free' status now

Kyle said...

Taxation in this region is inevitable. It’s also another way of funding ambitious projects while safeguarding one’s own sovereign wealth elsewhere. What’s also inevitable is that, the elsewhere could turn into a nightmare should there be a jolt aka regime change.

Anonymous said...

This is crap, how much more till the government is satisfied, a sad word, the government see the success of a section of department of how much money they make. I wouldn't be surprised if there were campaigns agaist this cause, someone has to stop them somewhere.

Grumpy Goat said...

One of my spies suggested to me that the situation is similar to that in Singapore. VAT at 3% will just about cover the admin costs.

Having got the VAT mechanism in place, it's then easy to apply it as a revenue stream if and when the government needs more cash in the future.

Anonymous said...

In a wealthy country like UAE, why is the Govt taxing it's citizens ? I presume they are intoxicated with money !!!!

kochumanavalan said...

VAT...is that something designed to combat the inflation that's currently choking the people living here?

P. S. To Iceman: Your comment re: Nationals not having to pay. That only applies to things like Government Health Card and family sponsorship. These are things their government owes them. In any case they are citizens so sponsorship is not a requirement. When it comes to Etisalat and RTA, they pay as much as anyone else--probably more, since they have more cars and drive faster (I'm speaking of speeding fines here).

Keefieboy said...

It's a step on the way to transparency. It's also likely to be inflationary. But, let's face it, 'tax-free' does not work.

But there's a problem. Once you have a GCC government having something called 'tax', then you will have a few million people arguing 'no taxation without representation'. It happened before, somewhere, can't quite remember where.

Keefieboy said...

It's a step on the way to transparency. It's also likely to be inflationary. But, let's face it, 'tax-free' does not work.

But there's a problem. Once you have a GCC government having something called 'tax', then you will have a few million people arguing 'no taxation without representation'. It happened before, somewhere, can't quite remember where.

rosh said...

Fine with VAT, as long as they partly use it to keep roads healthy - do away with silly OTT beautification projects (hint at SHJ).

Grumpy Goat said...

This morning (Sunday 11 May), a Mr Abdul Rahman, who is something big with the VAT organisers, was on Dubai Eye. He was at pains to note that VAT would replace rather than supplement existing taxes. He gave the examples of Municipality tax on restaurant bills and on import duties levied at the point of entry.

Abdul Rahman denied that VAT would be inflationary. He was unable to explain, however, that an item imported for say $1000 (plus 5% tax=$1050) would not cause inflation when it was wholesaled and then retailed at perhaps $2000 (plus 5% VAT=$2100). And this assumes that all retailers will drop their prices because importing stuff will become cheaper. Ha, ha, ha.

Imported raw food is currently zero rated for import duty, yet VAT will be levied on it at the retail outlets, Abdul Rahman said.

Watch your costs rise, folks...

Proud Emirati said...

^^ What he was saying was that VAT will replace the customs. So imported items will only have the 3-5% VAT and not 5% customs which will be canceled.

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