Dubai: Ministry of Finance Effects of VAT on Individuals Minimal

The Ministry of Finance stated that adopting value-added tax, VAT, in the UAE will have a positive effect on its development and competitiveness, and will contribute to building a sustainable knowledge-based economy for future generations, as the tax will provide additional financial resources and enable the UAE government to realise its strategy and guarantee a prosperous future.

The implementation of VAT is based on over 10 years of careful research by the Ministry and several specialist international institutions, to assess the impact of applying the tax in the country through many economic and social models..

The studies showed that VAT will help to support the UAE’s long-term sustainable development process, increase individual prosperity and promote the community stability.

Younis Haji Al Khoori, Under-Secretary at the Ministry of Finance, said that the tax issue is linked to many negative perceptions about the high cost of living and the potential impact on the performance of the business sector while stressing that this perception could be correct in traditional tax systems in other countries, but the UAE is keen to implement an effective tax system that considers the country’s future direction and protects its economic attractiveness and competitiveness.

Al Khoori stressed that VAT will provide additional sources of income for the UAE Government, which will enable it to improve its services and continue developing a future infrastructure that will support the country’s steady advancement in international competitiveness indicators.

The tax revenue will also help to complete development projects, expand the work market, create jobs in new related sectors, increase productivity and attract highly-qualified labour talents, which will benefit the business sector, as the new system will make it adopt innovative administrative procedures to keep pace with the latest developments and to effectively control operating expenses while the health and education sectors, which are exempt from VAT, will witness considerable services development, he added.Al Khoori affirmed that the new VAT rate is among the lowest internationally and its effects on individuals will be minimal, as it relies mainly on the averages and patterns of their spending.

Despite these facts, its contributions to economic and social development will be considerable and it will help to achieve the wise leadership’s vision of improving government services, which will make the community happy and enhance the welfare of individuals, he further added.

The UAE’s Federal Government and local governments provide various public services to citizens and residents, including hospitals, roads, public schools, parks, waste management and police services, and the cost of these services are covered by the government budget, Al Khoori noted. Therefore, VAT will provide a new source of income for the country, which will guarantee high-quality future government services and will help the government achieve its goal of decreasing the country’s reliance on oil and other hydrocarbon products as its main sources of revenue, he said in conclusion.