Entire GCC to impose VAT within 5 years

TAX IMPOSED: The entire GCC will introduce VAT within five years, Al-Saleh said. (Getty Images)

All GCC countries will have value added tax (VAT) within five years, a senior Dubai Customs official said on Thursday.

Speaking to local radio station Dubai Eye, Dubai Customs Executive Director Abdul Rahman Al-Saleh also said the UAE was expected to introduce the tax sometime next year, without being any more specific.

"It could be that if we or any other GCC country is ready, they can start [to introduce VAT], but the target is that in four to five years VAT should be in all GCC countries," Al-Saleh said.

"We [the UAE] envisage the implementation sometime in 2009 but I cannot tell you the month yet."

Al-Saleh told Dubai Eye it was inevitable VAT would be introduced, stating it was only a “matter of time”.

He said the exact date of its introduction would be announced by the federal government, but did not know when that would be.

The tax, which will replace customs duties to be phased out under free trade agreements, is likely to be set at a flat rate of between 3% and 5% and would be applied to all goods and services.

Small businesses with revenues under $1 million will be exempt from the tax, according to a statement by Dubai Customs on Tuesday, and companies within the health and education sectors could also be exempt, Al-Saleh said.

News of the introduction of VAT has raised fears that the UAE will become a less attractive place to work and do business.

Al-Saleh denied this, stating that VAT was replacing customs duties and was being introduced at a very low rate.

He also said that the introduction would not at to inflation, which likely accelerated to a 20-year peak of 11.4% last year and will rise slightly to 11.8% this year, according to a recent poll of analysts.

“[I have] no concern that the UAE will be perceived as less attractive for doing business, we have been looking at inflation and our conclusion is that VAT will not cause any inflation," Al-Saleh said.

"The VAT is being introduced to replace customs duties. We are targeting a very low rate of tax compared to an average of 20% in Europe.

"This is the best time to introduce VAT because the government can introduce it at very low rate because of its oil income."

Al-Saleh said on Tuesday at trade expo Arabian Travel Market (ATM) that the UAE would have the infrastructure in place for a VAT system by the end of this year.

RELATED: UAE ready for VAT by year-end

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USER COMMENTS (3 COMMENTS)

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VAT
Posted by Ali, Dubai on 11 May 2008 at 08:17 UAE time

The only beneficiary from the VAT are the governments and no one else. In response to AL, with the inflation increasing and prices being unbearable, expats can simply leave the region. However, we locals, all we can do is cope with the situation.

Do we have social programs... yes we do, but I for one would need at least 25 years to benefit from it!

Besides I need to work for the public sector to be eligible for the program. Even if did, what would I do until then?

We are all in this, both locals and expats.

VAT
Posted by Hombil, Muscat, Oman on 10 May 2008 at 12:23 UAE time

According to Al Saleh, VAT would replace customs duty. Today, there are quite a few products, which are exempted from customs duty. Services are not taxed at present. Hence, how can Al saleh say that VAT is just replacing the customs duty? With VAT in place, an individual will be taxed for what he is not paying at present. Therefore, VAT is nothing but a ploy of the GCC governments to introduce taxation.
Al saleh further states that VAT will not cause any inflation. If an individual has to pay more than what he/she is paying presently, the additional burden is nothing but inflation. That too, in the present scene, when inflation due to higher prices, rents etc. is highest in many years.

I hope common sense would prevail, before the governments introduce VAT in the GCC, which is already reeling under the pressure of high cost of living. For many expats, it would be a "rethink" to continue living here or go back home. And for nationals, it would be an additional expense, which the majority would not be able to afford.

VAT
Posted by Al, Dubai on 9 May 2008 at 14:42 UAE time

Trying to sell the VAT as a replacement for customs is ridiculous. We are not all idiots. If it was the same, the change would not be required. Then for the change to happens means there is money to be made there. Just like Salik, which was supposed to be a mean to deviate traffic away from Garhoud bridge, they want to put Salik everywhere. Why? Greed! To make money!

Why VAT? To make money!

To say that it is OK because it is only 5% or less vs 20% in Europe, is again a twisted way of making it less unpopular to introduce, but once it is introduced, the rate will go up with time.

Why come to the Middle East if we are going to be taxed here just like at home? At least, in our home countries, we get value for our paid taxes by the social services we get in return. We are still going to send our kids to private schools and use private hospitals etc. after VAT is introduced because the only beneficiaries of government social programs in the UAE are UAE nationals.

Inflation is out of control. Housing prices are out of control. This VAT will not help! It doesn't take an MBA or rocket science PHD to figure that out! It is like adding fuel to the fire.

It is already becoming less and less attractive to come work and live in the region, this will actually deter expats from coming here.

Let's wait and see! And pay the money in the mean time!

After VAT, will follow Income Tax... Mark my words!

Bottom line: Thriving economies, like the one here, don't need taxes to work, on the contrary, this is why this economy is thriving in the first place.

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