Industry expert also says 5% VAT rate is well below global average of 19%
About 5,000 finance and accounting jobs will be created within the Gulf region with the introduction of value added tax (VAT) early in 2018, according to an industry expert.
Paul Drum, head of policy at CPA Australia and an expert in tax law, was speaking at a workshop at the University of Wollongong in Dubai ahead of the launch of VAT in the region on January 1, 2018.
Drum said VAT has been implemented by more than 150 countries worldwide, adding that government revenues from taxation are generally used to pay for public services including public health services, public owned or funded schools, parks and transport infrastructure.
He added that the UAE will apply a VAT rate of 5 percent on taxable supplies which is very low in comparison to the average tax rate of 19 percent globally.
The consumer will be taxed on goods such as electronics, smartphones, cars, jewellery, certain beverages, financial and accounting services, legal services dining out and entertainment.
However, certain services and goods, such as nearly 100 food items, including basic health services, transport and public education will be exempted from VAT.
Drum said although the VAT registration process has only just commenced online, there is a shrinking window in which to prepare for it by reviewing and changing financial management processes, implementing new technology and appointing tax advisors if required.
He added that consumers can expect a spike in sales of certain items prior to the official implementation of VAT, which in turn could lead to a drop in sales in the same sectors in 2018.
“The combination of the new excise taxes and the GST will have a moderate impact on inflation,” he said, adding that the launch of VAT brings good news to current finance and accounting students and graduates as it will create "ample employment opportunities".For all the latest banking and finance news from the UAE and Gulf countries, follow us on Twitter and Linkedin, like us on Facebook and subscribe to our YouTube page, which is updated daily.