VAT in the UAE will bring higher inflation, society of finance professionals said…


An overwhelming majority of finance professionals would leave the Gulf Cooperation Council if income tax was implemented, research has found.

In a study by CFA Society Emirates, 80 per cent of the respondents said that they would consider moving abroad if the measure was introduced.

Nearly two-thirds (59 per cent) said the GCC’s tax-free environment was a key factor in their decision to move here.

On the corporate level, more than half of employers would not relocate if corporate tax was introduced.

Earlier this year, IMF managing director Christine Lagarde told finance ministers at the Arab Fiscal Forum in Abu Dhabi that it was time for Gulf states to introduce more taxes, including corporation tax, property tax and excise duties. The region should also prepare itself for personal income taxes, she added.

Of the Gulf states, only Kuwait and Qatar ran deficits below 10 per cent of GDP last year as oil prices plummeted to less than $30 per barrel in January following 2014 highs of $110.

The United Arab Emirates has already unveiled plans to become the first GCC country to introduce Value Added Tax, which will be implemented in 2018.

Ahead of this, 82 per cent  of CFA respondents said VAT would lead to higher inflation rates, with the  luxury goods and automobile markets most affected, alongside tobacco and real estate.

The association of finance and investment professionals said that healthcare as the sector will be least impacted by the additional VAT costs.

All of the respondent said they felt consumers would bear the cost more directly than retailers.

CFA Society Emirates president Amer Khansaheb said:”The short-term impact will be offset by the long-term benefit VAT will bring to the regional economies. There is an urgent requirement to diversify government revenues, which are currently still largely dependent on income from oil and gas, and VAT is a measure that will allow more stability given that the outlook for crude prices remains volatile.

“Additionally, VAT would encourage more responsible consumer spending patterns and prices would have to be reduced in order for demand to match this trend; which would eventually lead to a decrease in inflation rates.”

The UAE is expected to generate around Dhs 10bn to Dhs 12bn from the first year of VAT implementation.


Eleanor Dickinson ; Gulf Business (Economy) ; June 6, 2016


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