By Courtney Trenwith
The new tax will be a positive complement to recent subsidy reforms the International Monetary Fund says
The new value-added tax (VAT) will not adversely affect economic growth in the UAE, the International Monetary Fund (IMF) has said.
The VAT is due to be implemented in the UAE on January 1, adding 5 percent the cost of most goods and services, with the exception of sectors such as education, residential real estate and medical services.
The new tax is expected to add $3.27 billion to the UAE government’s coffers in 2018, rising to as much as $5.45 billion in 2019, UAE Minister of State for Financial Affairs, Obaid Humaid al-Tayer, said in December.
Despite some tax experts warning that businesses are unprepared for the additional regulation, the IMF said the VAT would be “another major achievement” in the UAE’s fiscal reforms following the 2014 downturn in oil prices.
The IMF said VAT would complement other fiscal measures such as subsidy reforms.
“The planned VAT introduction in 2018 is not expected to have a significant adverse impact on growth,” the IMF said in a detailed report on the UAE economy.