On January 1, 2018, the United Arab Emirates (UAE) and the Gulf Cooperation Council (GCC) member states are all set to join a list of 150 countries who have implemented Value Added Tax (VAT). The upcoming tax regime will not only affect the working class but will also have an impact on the businesses. Economic and taxation experts have been voicing concerns about the implementation of VAT as they believe the new tax would lead to operational risks for businesses and companies who will have to chalk out new and clear strategies to maintain growth of their businesses and not get majorly influenced by the VAT. You may know more on the complete VAT training Dubai here.
The new legislation has already sent shockwaves among the diaspora of international community living and working in the United Arab Emirates. According to a recent survey conducted by the CFA Society Emirates, around 82 percent of the recipients were of the belief that the implementation of Value Added Tax will skyrocket inflation rates across the seven states in the United Arab Emirates. As we look into the details, we come to know that four groups, i.e. government, business, consumers, and consultants, form the four stakeholders of the new legislation.
The International Monetary Fund (IMF) had predicted that the GCC governments will be facing a cumulative fiscal deficit of around 350 billion U.S. dollars over the next five years. The IMF released the forecast by basing its estimate on an oil price of 56 U.S. dollars per barrel. This is a massive amount for a five-year period, there the GCC states are forced to find the alternate ways to plug this deficit or they will end up borrowing from the international financial institutions. By implementing VAT, these governments can collect 1.5 percent of the total GDP, which is one-fourth of the total deficit. Wherever the VAT has been implemented so far, the end effect has been on the consumers who pay the tax on every purchase they make or every service they acquire.
In the equation of four stakeholders, governments are regarded as the main beneficiary but they will have a headache of ensuring proper collection of taxes. They will have to put into place a necessary infrastructure to supervise and collect the VAT. Another challenge for the governments would be to maintain their image of a tax-free haven for the expats. The recommended site will give your further insights into the full impact of the VAT on consumers in the UAE and GCC member states.