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Thu 2 Apr 2015 09:43 AM

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'VAT will hit the wrong people,' says Mishal Kanoo

Prominent Dubai businessman, of Kanoo Group, argues there are already enough indirect taxes & only low-middle income residents would be hurt

'VAT will hit the wrong people,' says Mishal Kanoo

The value-added tax (VAT) being proposed by Gulf states would hit the wrong people, prominent Dubai businessman Mishal Kanoo has warned.

The deputy chairman of Kanoo Group, one of the longest running family businesses in the region, argued there were already “a hell of a lot of indirect taxes” and a VAT was unnecessary.

“The ones that would be hurt by taxes would be what you consider middle class, but the super-rich, a person worth a few billion… how is that going to hurt them?” Kanoo told Arabian Business.

He also does not advocate the introduction of an income-scaled tax system.

“How is that fairer that a person who has worked and gained gets taxed by an entity that has not? How does that work to the benefit of society?” Kanoo argued.

“The purpose of any taxation, theoretically, is to take the money and spend it on society or community needs. In most parts of the wold, [state department finances operate in the] negative … in our part of the world they’re positive, they’re making money. So what’s the purpose of giving the government more money?”

Gulf officials this week agreed to formulate a general framework for the introduction of a VAT across the region.

A levy of between 3 percent and 5 percent has been proposed but a figure has not been finalised.

The framework is due to be submitted at a meeting of the GCC Ministers of Finance and Economy in May.

The six Gulf Cooperation Council member states have been mulling the introduction of VAT since 2007 to broaden their revenue base, with negotiations happening jointly to avoid any one nation losing out in competition with others in the region.

The recent sharp reduction in oil prices is thought to have lent a further push to introduce the levy, given that most Gulf states are expected to record budget deficits in the coming fiscal year and are reluctant to pare back spending on infrastructure and social spending aimed at developing their economies and improving the lives of citizens.

Officials at the IMF have long urged GCC states to introduce the tax as a way of ensuring a reliable inflow of government revenues, safeguarding against volatility in oil prices.

Arabian Business: why we're going behind a paywall

Ulevpri 5 years ago

Would be something new if a rule implemented would hurt the rich or the local... it is always and only meant to hurt us Expats and wouldn't happen if it would hurt the entire crow (e.g. the rich or the locals...)

Mosa 5 years ago

Thank you so much Mr. Kanoo, highly appreciate it. Makes a big difference when a high profile personality speaks for the normal masses, I am sure this is exactly what the people want to speak out. Your statement has hit the right note and we hope the authorities consider this element

Steve 5 years ago

Traders usually dont like VAT or Incomes taxes. They like government contracts though....

jitendra 5 years ago

I completely agree with sir as i feel that only the people who are needy will stay back as the Indian economy is quite good at the moment and people will start moving back . As it is many people are sending their families home due to the increase in expenses in UAE.

John Doe 5 years ago

Mishal. We met back in Bahrain many yrs ago. As I remember you, always the straight shooter. Well said.

Dubais list of indirect taxes: Salik, studio rents for the same price of villa in most Mediterranean countries, an exaggerated DEWA (12 times more than KSA rates) and the list goes on. Talent and other core drivers such as corporations looking to setup up shop here will continue to slow in their pace of migrating here as the cost of hiring talent (which will only move if they can earn more than back home e.g: A german pays 800 euros for a lovely 1-2bed in Berlin or munich. To give him the same standard here he needs 2500-3000euros for JUST the apt. He gets his medical insurance, social and unemployment benefits) IN short, he needs to earn 2.5times as much to live like he did back home.

A luxury tax is required to balance the books. Not a general tax. Tax the Rolls Royce and lambo. Vertus. Jewellery. The houses that cost more than say $2mil. Luxuries. Not the blue collar sweat.

Amir 5 years ago

I do agree . As long as we love UAE we dont want hurt UAE economic with wrong iDEAL like VAT . Because already there is a lot of hidden expenses like licence and sponsor or salik...... Then im sure with our wise leader never let it happens.

chris matthews 5 years ago

As I resident of Bahrain I totally agree.
The Middle East with an expanding populations needs to get itself off certain subsidies and offer a proper social Welfare State where the poor are protected.
Income tax for the rich and an end to subsidies , especially petrol, electricity and water.
This money also needs to be totally transparent and spent on education.
The GCC need to all do this together and perhaps their economies can get themselves off a total reliance on fossil fuel income.
The world is changing.
New technologies and alternative fuels mean changes need to happen now.

Tony 5 years ago

Every country that followed IMF advise has suffered, bar none. Good luck GCC!