The UAE will start implementing a 5 per cent Value Added Tax (VAT) from January 2018. The new levy seems a small figure when compared to the 150 countries already implementing VAT or a similar method of taxation (in the UK, for example, VAT is 20 percent).
Yes, we might see a general rise in our cost of living, but with the GCC members having already agreed to exempt 94 food products, as well as school fees and healthcare bills, from the new taxation, there’s no need to pack your bags just yet. Electronics, smart phones, cars, jewellery, watches, eating out, and entertainment will fall under the taxed category. GCC countries are also expected to introduce excise duties on certain beverages that are deemed to be harmful to health, including those with high sugar content.
The VAT will have minimal impact on residents with less appetite for luxury goods, services and lifestyles. It will not stoke inflation for the common man as vital household expenditure items are exempted from its ambit. While the impact of tax on property transactions will be limited to the wealthy or those above upper middle income group, a likely hike in the cost of financial services will hit the common man. VAT will also have an effect on the buying power of tourists as they will have to pay duty tax again on certain goods in their country of origin. Dh12 billion is the estimated revenue to be generated by the UAE through VAT in the first year.