The UAE Government has drawn up plans to introduce both a federal sales tax – or value-added tax (VAT) – and a corporation tax, according to Al Ittihad, the Arabic-language sister paper of The National.
This would make the UAE the first country in the Arabian Gulf to introduce an economy-wide indirect tax on consumption.
VAT would be levied at a higher rate on luxury goods, alcohol, and tobacco. Basic goods and essentials would be exempt from VAT.
“VAT is likely to have an effect on consumer spending because it will immediately push up consumer prices,” said William Jackson, a senior emerging markets economist at Capital Economics. “In the near term, it will act as a drag on growth.”
The government did not specify what the tax rate would be, but the IMF has previously recommended that the UAE set VAT at, or about, 5 per cent.
It is not known when or how the government would introduce VAT. Companies and consumers would be given up to two years to adjust to the new tax rules.
The government also plans to introduce a corporation tax, Al Ittihad reported, but did not provide details. The UAE currently levies corporation tax on foreign banks’ operations in the country.
The Ministry of Finance, which is responsible for federal tax collection and government accounts, said that it had finished drafting laws providing for a federal tax system, in addition to legislation to introduce VAT and corporation tax.
It is likely to be some time before the proposals become law. High-profile legislation must be shuttled between all interested government departments, before it is scrutinised by the Federal National Council, approved by the Federal Supreme Council, and signed by Sheikh Khalifa, the President.
“The draft of the corporate tax law and the value-added tax law has been discussed with the local and federal governments,” Younis Haji Al Khouri, an undersecretary at the Ministry of Finance, said last month.
The move comes as Gulf states address a new era of low oil prices. Oil has fallen from about $115 per barrel in June last year to approximately $50 per barrel now, cutting government revenues by about 20 per cent against 2013 levels.
That has opened up a hole in the UAE’s budget. The country will run a fiscal deficit of 2.3 per cent of spending this year, the IMF estimates.
The IMF has long suggested that the UAE introduce a VAT. In its annual economic study of the country, the fund said that the UAE “should consider raising non-hydrocarbon revenues by introducing a VAT, in coordination with the GCC countries, and broadening corporate income and excise taxes”.
Mr Jackson said the move towards a VAT “reinforces the impression that the UAE is the one Gulf state that is taking fiscal consolidation seriously”.
He added: “It seems that the UAE is taking the most serious steps to increase non-oil sector government revenues of all the Gulf countries.
“The UAE is in a stronger position than other Gulf nations because policymakers have more confidence that country’s private sector is fully functioning and well developed, and because its economy is more diversified away from dependence on oil.”
abouyamourn@thenational.ae
Company%20Profile
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What went into the film
25 visual effects (VFX) studios
2,150 VFX shots in a film with 2,500 shots
1,000 VFX artists
3,000 technicians
10 Concept artists, 25 3D designers
New sound technology, named 4D SRL
Top Hundred overseas picks
London Spirit: Kieron Pollard, Riley Meredith
Welsh Fire: Adam Zampa, David Miller, Naseem Shah
Manchester Originals: Andre Russell, Wanindu Hasaranga, Sean Abbott
Northern Superchargers: Dwayne Bravo, Wahab Riaz
Oval Invincibles: Sunil Narine, Rilee Rossouw
Trent Rockets: Colin Munro
Birmingham Phoenix: Matthew Wade, Kane Richardson
Southern Brave: Quinton de Kock
What to watch out for:
Algae, waste coffee grounds and orange peels will be used in the pavilion's walls and gangways
The hulls of three ships will be used for the roof
The hulls will painted to make the largest Italian tricolour in the country’s history
Several pillars more than 20 metres high will support the structure
Roughly 15 tonnes of steel will be used
Company%20Profile
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TRAP
Starring: Josh Hartnett, Saleka Shyamalan, Ariel Donaghue
Director: M Night Shyamalan
Rating: 3/5
COMPANY%20PROFILE
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The specs
Engine: 1.5-litre 4-cylinder petrol
Power: 154bhp
Torque: 250Nm
Transmission: 7-speed automatic with 8-speed sports option
Price: From Dh79,600
On sale: Now
The specs
Engine: 2-litre or 3-litre 4Motion all-wheel-drive Power: 250Nm (2-litre); 340 (3-litre) Torque: 450Nm Transmission: 8-speed automatic Starting price: From Dh212,000 On sale: Now
Profile
Co-founders of the company: Vilhelm Hedberg and Ravi Bhusari
Launch year: In 2016 ekar launched and signed an agreement with Etihad Airways in Abu Dhabi. In January 2017 ekar launched in Dubai in a partnership with the RTA.
Number of employees: Over 50
Financing stage: Series B currently being finalised
Investors: Series A - Audacia Capital
Sector of operation: Transport
Company%20profile
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BEETLEJUICE BEETLEJUICE
Starring: Winona Ryder, Michael Keaton, Jenny Ortega
Director: Tim Burton
Rating: 3/5
The Penguin
Starring: Colin Farrell, Cristin Milioti, Rhenzy Feliz
Creator: Lauren LeFranc
Rating: 4/5
COMPANY PROFILE
Name: Rain Management
Year started: 2017
Based: Bahrain
Employees: 100-120
Amount raised: $2.5m from BitMex Ventures and Blockwater. Another $6m raised from MEVP, Coinbase, Vision Ventures, CMT, Jimco and DIFC Fintech Fund
How to watch Ireland v Pakistan in UAE
When: The one-off Test starts on Friday, May 11
What time: Each day’s play is scheduled to start at 2pm UAE time.
TV: The match will be broadcast on OSN Sports Cricket HD. Subscribers to the channel can also stream the action live on OSN Play.
COMPANY%20PROFILE
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The Bio
Name: Lynn Davison
Profession: History teacher at Al Yasmina Academy, Abu Dhabi
Children: She has one son, Casey, 28
Hometown: Pontefract, West Yorkshire in the UK
Favourite book: The Alchemist by Paulo Coelho
Favourite Author: CJ Sansom
Favourite holiday destination: Bali
Favourite food: A Sunday roast
Turning%20waste%20into%20fuel
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MATCH INFO
Crawley Town 3 (Tsaroulla 50', Nadesan 53', Tunnicliffe 70')
Leeds United 0
Company%20Profile
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Company%20profile
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