UAE anticipates $3.3bn windfall from introducion of V.A.T.


The United Arab Emirates is  likely to generate revenues of between AED10bn and AED 12bn ($3.2bn) in its first year of implementing value added tax, a senior official has confirmed.

The country is hoping to impose VAT by 2018, confirmed undersecretary at the UAE’s Ministry of Finance Younis Haji Al Khoori.

“The VAT would be introduced at the rate of between 3 per cent to 5 per cent of the goods’ value, but Gulf Cooperation Council countries are yet to finalise their implementation policy,” Al Khoori told reporters.

Al Houri
Younis Haji Al Khouri

The GCC countries have however implemented a tentative plan for implementing the tax, he added.

In early December, Al Khouri had confirmed that the GCC countries had reached an agreement to exempt approximately 94 mainly food items. They also agreed to avoid imposing the tax on healthcare, education and social services sectors.

He said there were a couple of sectors such as financial services where the member states had not yet reached an agreement.

In the UAE, once a decision to impose VAT is made, the public will be given 18- 24 months to prepare, the finance ministry has said.

With oil prices touching 12-year lows, GCC countries have been forced to tighten their belts and look for alternative sources of revenue. The introduction of VAT, long considered by the region, is now being seriously considered as a viable source of revenue.

However, a recent report by Oxford Strategic Consulting opined that GCC states can generate at least 10 per cent of their gross domestic product through a number of non-tax revenue options. The report pointed out that the governments could maximise their revenues by tapping into state-owned enterprises and pension funds, both of which could provide a high rate of return. It also suggested that more citizens must be encouraged to work in the private sector.

This article by Aarti Nagraj , originally appeared in Gulf Business

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