UAE could earn $3bn when VAT is introduced in 2018, says official

Two Gulf states have still to agree to the proposal before it can be implemented

The UAE expects to generate between AED10 billion ($2.7 billion) and AED12 billion in revenue in the first year of implementing value added tax (VAT), an official has revealed.

The country aims to introduce the tax in 2018 at a rate of between three and five percent, Younis Haji Al Khouri, the UAE finance minister undersecretary, told reporters in Abu Dhabi on Wednesday.

Al Khouri said GCC countries have agreed on key points of implementing the new tax on goods and services, but there remain issues to resolve and the proposals have yet to receive final approval from GCC members. In particular, he said, two states had yet to give their approval.

It would be the first time the region has introduced direct taxation, in an attempt to boost regional coffers following a sharp drop in the oil price.  

Al Khouri was speaking on the sidelines of the Undersecretaries of Arab Ministries of Finance’s meeting in Abu Dhabi. The meeting aimed to boost cooperation between Arab states in economic and social issues, Gulf News reported.

He was quoted as saying: “We have a tentative approved plan for 2018. We have to obtain GCC approval from two countries. The leaders of the GCC have already approved the tentative plan of 2018, so we are waiting for that.

“Once two countries will approve, then the implementation will start.”

Al Khouri said a study conducted in 2014 had suggested a VAT would generate billions of dirhams of revenue for the UAE in the first year of implementation alone.

He also said certain sectors such as healthcare, education, social services, and 94 different food items would be exempt.

“There was a study conducted in 2014 that showed that the [revenues] collected from the implementation of value-added tax for the UAE are between AED10 billion to AED12 billion given that the tax will not be applied on some large industries like education, healthcare, and food staples,” Al Khouri said.

He said it would take around two years for the law to be implemented once ratified.

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