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The value added tax (VAT) is being officially implemented in the UAE from today. The government has taken a step in the right direction. The Gulf Today shares the views of leading business and financial experts in the UAE. They are of the opinion that it will provide the Government with a viable source of diversification to its revenue stream Shan Saeed, Chief Economist at IQI Holdings: The UAE is embarking on a journey of strategic business landscape with implementation of VAT in the economy. This provides an opportunity for UAE to join the elite countries where VAT is making an impact on the economy. There are different perspective on the VAT from two sides of the school. One perspective is, it brings documentation, gives stability to the economy, enhances tax to GDP ratio, makes fiscal side stronger, grows efficiency in the market, allocates main resources perfectly in line with market forces and formalizes the consumption pattern. Another perspective is, it creates inflation, hurts consumption and distorts the market. I can share few global perspectives where with introduction of VAT, economies have done reasonably well at the macro level. “At the macro level, VAT has positive impact on the economy. According to the latest issue of Chicago Booth Review Fall issue-2017: The US and other developed economies are stuck in a low-growth pattern, and low interest rates limit what central banks can do to help. “While raising taxes is politically risky, research suggests that a Value Added Tax could be used to spark growth. One of my professors from Uni of Chicago Booth’s Michael Weber explains how a VAT hike that Germany announced in 2005 led to a consumption boom—and why the US might want to follow Germany’s lead. Empirical evidence proved that VAT actually increased consumption in Germany and helped improved economic growth.
 Satish Khanna, General Manager, Al Fajer Information & Services: With value-added-tax (VAT), being subject to most sectors, the new tax regime will also be applicable to the event and exhibitions industry. In the UAE, the events and exhibition industry is thriving and it is fair that the industry is subject to VAT. He noted that working with VAT registered companies will not only help exhibitors and suppliers reclaim their input VAT, but will also ensure safety of transactions.”
“I strongly believe that the imposition of VAT for the UAE events and exhibitions industry will enhance the value of investment and support the growth and development of the sector.”
“Moreover with Expo 2020 approaching, VAT will assist the government facilitate the services easily,” he added. Khanna mentioned that currently VAT is present in 150 countries and contributes to 20 per cent of worldwide tax revenues, adding that he strongly believes that implementation of tax would help citizens in the UAE make effective utilisation of things particularly electricity and water. “The revenue earned from VAT will go a long way to maintain effective public services and position UAE as a globally competitive country with truly diversified economy. “While the government will see a difference, it is to be noted that the implementation of VAT is going to be beneficial even to the citizens. Many companies have already revised salaries for employees, while the number of jobs relating to finance and accounting have increased,” he added. Khanna disclosed that though there has been constant discussion about VAT, its time people realise that the UAE is now moving to the next level of growth, which would mean the UAE government is working to take steps and measures to prepare the economy and business towards this next level of development. “As responsible citizens we must support and cooperate with the government, because whatever happens will be in the best interest of the country, business and consumers.” “While many citizens are objecting VAT considering that it will impact their daily living and lifestyle, it must be noted that VAT is not an income tax. It is just a value-added tax which will boost government revenues, as an alternative source from oil. “VAT will not have a big impact on the cost of living as the rate is one of the lowest in the world. Unlike income tax, VAT will help the government to boost its services to further improve infrastructure and offer better facilities,” he concluded.
Dr. Asma Salman, Associate Professor of Finance, Department Chair – Accounting, Finance and Economics College of Business Administration, American University in the Emirates: As per the Cabinet Decision on the Executive Regulations of the Federal Decree-Law, value added tax is applicable in the UAE from today. The supply of educational services shall be subject to the zero rate if the supply of educational services is provided in accordance with the curriculum recognized by the federal or local competent government entity regulating the education sector where the course is delivered. “Similarly, the educational institution must be recognised as above as well. A supply of Goods or Services made by educational institutions shall be zero-rated where the supply is directly related to the provision of a zero-rated educational service”, she added. Guidance on zero-rated and exempt supplies, so… what really is the zero-rate? Any supplies, even at 0 per cent rate are required to be recorded in the VAT account and reported in tax returns. Suppliers must register for VAT if the taxable turnover exceeds Dhs 375,000 annually. Now the difference comes between the zero-rated supplies and tax-exempt supplies. The VAT exempt supplies are not taxable; which means that no expenses can be recovered if they are tax-exempt, however exceptions are there. Examples include bare land, financial services including insurance and re-insurance, residential buildings etc. As responsible citizens we must support and cooperate with the government, because whatever happens will be in the best interest of the country, business and consumers.
CA Naveen Sharma, Chairman, ICAI, Dubai Chapter: VAT will provide the government with a viable source of diversification to its revenue stream. He noted that that the rate of VAT is 5 per cent which is one of the lowest in the world. He expressed his optimism that the implementation of new taxes would further boost the country’s economic growth and would create more jobs.
Promoth Manghat, CEO, UAE Exchange Group: Signing of the Executive regulations on Value Added Tax is a welcome move as it puts to rest the speculations making rounds. “We believe the 5 per cent VAT applicable on the money transfer fee will not have a negative impact on the money transfer industry in the long run. “The application of VAT will require all companies to make an amendment in the current systems and processes,” he added.
Sudhesh Giriyan, COO, Xpress Money: There has been a lot of speculation about the implication of Value Added Tax on remittances from the UAE. “With the signing of the executive regulations on VAT, we finally have the answers. “While sending money abroad, the 5% VAT will only be applicable on the remittance fees and not the entire amount to be sent. He mentioned that this comes as good news for remitters as there will only be a bare minimum increase in the fees for money transfers, which will be almost inconsequential.
Victor King, Founder & CEO of Absolute Communication Group: We welcome the introduction of VAT to the economy. I believe that it will provide the government with a viable source of diversification to its revenue stream. I do believe that it will be a great way for the non-essential commodity market to give back to the economy.
Arslan Mushtaq, Partner at ATH, having over 12 years of experience in the VAT and Auditing in the UK working with PwC and KPMG: VAT will bring in transparency, which will help the financial sector to differentiate between genuine businesses and suitcase operators. ATH Business Consultants working in the region for last 4 Years welcomes this move and is very positive about the introduction of VAT in the region.
Usman Alam, Director, ATH Business Consultant: The government has taken a positive step in the right direction. It will bring additional income for the Government. VAT will have its challenges but it will definitely bring a positive change in UAE’s economy.The rate of VAT is 5 per cent which is one of the lowest in the world. However, there are some exemptions on essential goods, health care, education and other items where the VAT will be zero rated or exempted.
Yassir Gadit, Managing Director at Gadlang Management Consultants: Gadlang Management Consultants, tax advisors, appreciates the implication of VAT in the country. New year will bring new challenges and new opportunities. VAT will be an addition to 2018. We have done our bit of preparing our client for VAT. The only word of advise I will give is that don’t leave any transaction unrecorded as this will have impact on your VAT recoverability.
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