UAE official says no VAT until at least 2010

TARIFF ALTERNATIVE: A value-added tax is seen as a replacement for customs duties. (Getty Images)

The UAE will not introduce a value-added tax until at least 2010, an official has said, countering media reports that it will be implemented in early 2009.

Replacing import tariffs with VAT will involve the creation of a "huge infrastructure" and may not be possible unless all six member-states of the GCC adopt the system together, newswire Bloomberg reported Saeed Khalifa Saeed Al-Marri, deputy director general of the UAE Federal Customs Authority, as saying.

The UAE has been studying the adoption of VAT to replace customs duties that will be abolished as the second-biggest Arab economy signs free-trade agreements, the newswire reported. The country is currently negotiating trade deals with the European Union, China and India, among others.

If the introduction of VAT is dependant on a GCC-wide agreement it will be even more difficult because many of the countries are yet to start looking at it, Monica Malik, chief economist at EFG-Hermes Holding SAE told the newswire.

The GCC set up a customs union in 2003 that demands the charging of a uniform five percent import tax duty."If we reach the point where it might come into effect, that means we have to study all the procedures, because it will affect the customs union and it will affect even the whole customs work in the UAE," Al-Marri told the newswire.

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