Ministry of Finance says UAE is still studying VAT proposal; no deal yet with neighbours on rates, exemptions
The United Arab Emirates is still studying a proposal to impose value-added tax but its introduction has been delayed by a lack of agreement among neighbouring countries on rates and exemptions, the Ministry of Finance said on Tuesday.
"If the GCC countries reach a final agreement on issues related to the application of VAT, it will be announced directly," the ministry said in a statement carried by UAE state news agency WAM. It did not elaborate on when agreement might be reached.
The six oil exporting states of the Gulf Cooperation Council have been studying the introduction of VAT for years. The plunge of oil prices since last year has slashed governments' income, making it more urgent for them to find new revenue; the UAE is expected this year to post its first budget deficit since 2009.
But VAT has been delayed partly because it is politically sensitive, and partly because GCC governments have been unable to agree on details. Analysts believe that to limit smuggling and damage to the competitiveness of economies, the tax would probably have to be introduced regionally rather than by individual countries at different times.
Once a decision to impose VAT is made, the public will be given "a time horizon of no less than 18 months to prepare for the implementation and discharge the obligations towards the tax requirements", the UAE ministry said.
Separately, the ministry said it was still studying reforms to increase taxation of corporations in the UAE and that the tax rate was under study. Businesses will be given at least one year to prepare for any changes, it added.
At present there is little corporate taxation outside the oil sector, apart from a 20 percent levy on foreign banks in Dubai. The government has been considering whether to impose a broad corporate tax across the economy.
Though the UAE is one of the financially strongest countries in the GCC, it has been the most aggressive in reforming its finances to save money. This month it cut state gasoline subsidies, allowing prices paid by consumers to rise, and in January Abu Dhabi reduced electricity and water subsidies.
The International Monetary Fund has been advising the UAE to impose taxes gradually to limit any disruption to the economy and gain experience operating a tax collection regime.
In a report this month, the IMF suggested that the UAE consider imposing VAT at a 5 percent rate, a 10 percent corporate income tax, and a 15 percent excise tax on automobiles.
It estimated these steps would ultimately generate revenue equal to 7.4 percent of non-hydrocarbon gross domestic product.
Go Ahead UAE and all GCC, At the end, it must be done to save our Economy.
If no/low taxation model has worked so well for this region all these decades, so why now?
Agreed, Taxation is an important source of money for the Govt, but that can dry up other sources which this region learned to get money from.
Example, due to absolutely no laws for income tax, unlike other countries, there is no concept of illegal money and wealthy people are not scared of expenditures and on luxury, like those in many other countries where they try to illegally hide the wealth or transfer the wealth to Swiss banks and spend in those countries.
Unless a country has very strong monitoring system (like in USA) and ability to share tax data with other countries (again like USA), Taxes can be a double edge sword.
Moreover, many from Sub-continent and MENA countries have accumulated wealth in UAE banks. Will they be taxed?
All the VAT noise is coming from Deloitte, KPMG, etc who are the biggest benefactors due to increased Tax related work for this accounting firms.
Hany...it must ONLY be done if the GCC nations want to borrow IMF money. VAT is the repayment mechanism to the IMF. It does NOT go into the govts pockets...it goes to the IMF to service their borrowings.
Just like Income Tax in the West does NOT go to the govts...it goes to the Inland Revenue Tax bodies...which are PRIVATE companies NOT govt bodies...they then disburse the govt loan repayments to the PRIVATELY owned Central Bank...for the privilege of that PRIVATELY Central Bank printing the nations currency.
All Western Central Banks are Private entities and all Tax Collection agencies are Privately owned entities.
When you get your head around that...you will understand the term 'Debt Enslavement' and that it is Impossible to repay the Central Banks the interest they charge for printing the Nations money.
I feel like I've just stepped into a parallel universe or else I've have been living as the victim of a conspiracy on a par with the Matrix. The Bank of England, HMRC and C&E have been privately owned all along! I've been paying tax all this time for the enrichment of an evil cabal of Illuminati controlled corporations. OMG, if this is really true how can I even tell if in any meaningful sense that I'm real. Perhaps I'm a semi-sentient netbot that's convinced myself that I exist for the purposes of propagating horrendous lies about taxation being a government levy.
Surely MT3 you do not believe the FED is a govt Institution or for that matter the Bank of England? Surely you know that the US IRS is headquartered in South America and not the USA and is indeed a Private Institution just as the Uks HMRC?
I can understand you may not fully understand how taxes are raised and paid and to whom but this is all in the public domain if you care to read it.
Suggest you read about 'fiat' currencies and fractional reserve banking. Its very basic stuff and tells you a lot about the wokings of Banking and accumulation of Govt debt etc.
There's no conspiracy...its fact.
Nice one Simon.
That has tickled me ready for the weekend.
Next, we will hear that the comets are really tax collectors in disguise, looking where to pounce next.
Simon is correct. You only have to do the research, most of which is grounded in history. Funnily enough MT3's sarcasm is not far off the mark. No, we're (I hope) not living "The Matrix" but we might as well be since 99%(ish) of the world's population have been nicely hoodwinked into thinking the world economy works one way when in fact it works quite differently and there is a fairly small number of beneficiaries of the system. Look up fiat currency and fractional reserve banking as Simon says and you will start to remove a small part of the wool from your eyes. And maybe you'll go on from there and be amazed to find that most of what you've been led to believe about economics is a smokescreen. Please just bother to look.