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Fri 14 Jan 2011 03:30 PM

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Dubai may raise road toll if needed; no new taxes

Toll may be raised to ease congestion and solve traffic problems but not to increase income, says official

Dubai may raise road toll if needed; no new taxes
Traffic on the paid 12-lane Sheikh Zayed road is nowhere near levels seen in 2007 and 2008 when cars regularly got stuck in traffic jams

Dubai is not considering new taxes to boost its revenue base, although the debt-laden Gulf Arab emirate might raise its road toll fee if necessary, a senior government official said on Thursday.

The global financial crisis that pierced Dubai's property bubble had forced the emirate to get to grips with part of its debt load, estimated at $115bn or 123 percent of GDP, and introduce a range of austerity measures over the past year.

September's $25bn Dubai World debt restructuring deal offered some relief to the emirate — one of seven in the United Arab Emirates federation — but the debt-repayment outlook remains challenging.

Asked whether Dubai considered introducing new taxes, Dhahi Khalfan Tamim, a member of Dubai's Executive Council and the emirate's police chief, said: “There will be no taxes at all.”

"If necessary (raise the) Salik (toll). Not for income, but to solve the heavy traffic problems," Tamim told Reuters on the sidelines of an event.

In September, the government said it had no plans to implement income or corporation taxes. It relies on fees and taxes for around 77 percent of its budget revenue.

Deciding to impose income and corporate taxes would have marked a dramatic shift in philosophy, as Dubai has used its low-tax status to attract businesses and cement its position as the region's trade hub.

Dubai launched the Salik electronic toll collection system in 2007 to ease congestion in the city of now some 1.9 million inhabitants and generate more income for the emirate, which lacks the oil wealth of neighbouring Abu Dhabi.

However, traffic on the paid 12-lane Sheikh Zayed road is nowhere near the levels seen at the height of the oil and property-led boom in 2007 and 2008, when cars regularly got stuck in traffic jams.

The emirate's Roads and Transport Authority, which operates Salik, was projected to contribute some 3.4bn dirhams ($925.7m), or 11.5 percent of last year's budget income. The actual Salik contribution has not been made public. Dubai slashed its projected budget gap to 3.78bn dirhams for 2011, around 1.1 percent of gross domestic product and the lowest since 2007, trimming spending on projects and raising income slightly, the government said on Wednesday. A detailed breakdown is not available.

Some $30bn worth of loans and bonds of predominantly state-linked enterprises are due to mature in 2011-2012, which is seen as a key challenge for Dubai as it seeks to recover from a November 2009 debt crisis.

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