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Dubai: Dubai Customs said on Saturday that the implementation of a value added tax (VAT) in the UAE and Gulf region would have a significant positive impact on strengthening the economies and raising the current living standards.
A senior official from Dubai Customs said on Saturday that the opinion expressed by an International Monetary Fund (IMF) official on the impact of VAT on inflation is a personal view.
Recent media reports had quoted Mohsin Khan, regional director of the International Monetary Fund for the Middle East and Central Asia, as saying that the implementation of VAT would raise inflation in the UAE.
Abdul Rahman Al Saleh, executive director of Corporate Support Sector in Dubai Customs, said the statement of the IMF official that inflation would increase by two per cent after implementation of VAT in the UAE and GCC was based on personal speculation, and does not reflect the advice of the IMF on VAT implementation in the UAE.
Although some media reports quoted Khan as having said that VAT would result in an increase in inflation rate by one to two per cent, he told Gulf News in an exclusive interview last week that VAT is a positive development for the UAE and the region and its impact on prices will be negligible.
Impact
"In all countries adopting the VAT, its impact on retail prices is a source of concern for the politicians and the public. The evidence, however, suggests that there is no reason to expect that VAT would be inflationary, although it may have a one-time effect on the general price level and may lead to a change in relative prices," a recent IMF report said.
"It is well known globally that implementing VAT in many countries has significantly contributed to boosting the economy's sustainability, as VAT is considered the ideal tax for already strong economies. While the UAE seeks to strengthen and diversify its economy, the country will not be an exceptional case in this regard," Al Saleh said.
Do you believe VAT will have a direct impact on the growing inflation? How do you think this will affect businesses in the UAE? Tell us at letter2editor@gulfnews.com or fill in the form below to send your comments.
Your comments
This is shocking! What next? Income tax? So what's the point of leaving our country to work here as an expat? If we have to start paying taxes, a whole lot of expats will be returning home lock, stock and barrel! What will happen to the economy here then? All the development will start to slow down then.
Hanim
Christchurch,NZ
Posted: May 18, 2008, 14:26
This is just another of the usual explanations given to extract money from people in the name of development. Does a country like the UAE, which is rich in oil and real estate and is already inflating like anything, really need VAT?
Jay
Dubai,UAE
Posted: May 18, 2008, 13:15
I wonder if it is known how many accountants, investigators and auditors (not to mention court time for those who don't pay) it will take? And what the actually cost of collecting the VAT will be? Will any money be left at all after all that is covered?
Maryam
Sharjah,UAE
Posted: May 18, 2008, 12:25
VAT in Dubai will have a negative impact on the tourism market. I think the average tourist celebrates the lack of VAT tax. The majority of tourists from neighbouring countries will move their freed weekends elsewhere, to a place with no VAT. Qatar could benefit if it continues to develop and doesn't implement this VAT.
Fred
Dubai,UAE
Posted: May 18, 2008, 09:39
The successful implementation and improvements come about with the VAT being refunded to the needy individuals within a certain income bracket. So how can the implementation of VAT improve the standard of living in UAE when the bulk majority are expatriates? On the contrary, the implementation only benefits the locals by taxing the needy expatriates in the country.
John
Deira,UAE
Posted: May 18, 2008, 09:04
This will absolutely have an impact on inflation. This can only be offset by a mandatory implementation of minimum wage in the UAE otherwise I don't see how it will not impact. Most countries need VAT for public spending, but with oil at record prices I don't understand why the UAE needs another source of income from its people.
Mukesh
Toronto,Canada
Posted: May 18, 2008, 02:37
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