UAE's tax agreement with US 'won't deter workers'

US-UAE business councils argue Americans will still want to work in the UAE despite the gov’t agreeing to help the US crackdown on tax evasion
UAE's tax agreement with US 'won't deter workers'
Dollar, Cash, Currency, Money
By Courtney Trenwith
Wed 24 Jun 2015 01:52 PM

American citizens will not be deterred from working in the UAE despite the Gulf state formally agreeing to help the US government crackdown on tax evasion, according to business council representatives.

The UAE government last week signed an agreement that forces all financial institutions in the country to provide the US government information on American citizens’ salaries and assets, following the introduction of the Foreign Account Tax Compliance Act (FATCA).

The tougher measures have reportedly caused some Americans with dual citizenship living abroad to relinquish their American passport.

But US-UAE Business Council president Danny Sebright told Arabian Business he did not expect the implementation of FATCA in the UAE to deter Americans from choosing to work there.

“The bottom line is that Americans always had to pay tax on their income above a certain level. FATCA and the agreement with the UAE just puts more mechanisms in place to ensure that American expat workers in the UAE might find it more difficult to evade paying the tax for which they were always liable,” Sebright said.

“I don’t expect it to have much of an impact on the viability or desirability of US citizens wanting to work in the UAE. The overall working and living conditions in the UAE still make this country a fantastic destination with tremendous opportunity for Americans who want to live and work abroad and raise their families in a tolerant, safe environment.

“Moreover, the growing access to world class health care, education, and cultural activities means that the UAE will remain a top destination for American expats living and working abroad.”

Sebright’s counterpart in the UAE, American Business Council of Dubai and the Northern Emirates president Ramsey Jurdi, also did not expect the agreement to dissuade Americans from working or moving to the UAE.

“In theory this agreement should be reached with most countries around the world, so it should be relatively equal anywhere you go,” Jurdi said.

“This would not be something that would be particularly persuasive in terms of determining where to go.

“[Although] I’m talking about Americans who are in compliance with tax laws. If you were looking to evade taxes, certainly they’re going to go to a country where that’s easier.”

Kuwait and Qatar also have signed similar agreements with the US government.

But MENA managing director of recruitment agency Morgan McKinley, Trefor Murphy, said there would be a “huge” impact on the UAE’s appeal to American workers.

“Income tax put on any nationality that works in the UAE, I think it will have a decided impact on somebody’s decision to come to the UAE, without a shadow of a doubt,” Murphy said.

“Particularly in the States… a percentage of their rational to come to this region - not just the UAE but the Gulf – is to not pay tax and to be able to save.”

Murphy said Americans close to retirement particularly chose to spend their last 5-10 years working abroad in countries such as the UAE where they did not have to pay tax, to help prop up their pensions, many of which had been cut during the recent global financial crisis.

“With the recent financial [crisis], pensions, not just in the States but in Europe, are taking a real hammering and they’re coming out here to boost their pension funds,” he said.

“So I think [the UAE FATCA agreement] will have a huge impact on people from the US coming out here.”

Without the benefit of not paying tax, the higher cost of living in the UAE would make the country less appealing for American workers, he said.

“Dubai and Abu Dhabi are more expensive places to live than most cities in the States,” Murphy said.

“But I think there’s a notional idea that you get paid more here – that could be the case in certain very specialised areas.”

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