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02 January, 2018

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UAE/ Dubai Marks Beginning of VAT ERA w.e.f 1st January, 2018 - Here are the Basics

UAE/ Dubai Marks Beginning of VAT ERA w.e.f 1st January, 2018 - Here are the Basics
The introduction of a Value Added Tax (VAT) regime in the UAE marks the beginning of a new era in the history of the UAE economy where the general public will start sharing the burden of budgetary expenditure, starting today (January 1, 2018).
While the VAT is expected to contribute Dh12 billion to the UAE exchequer, studies show the consumption tax across GCC countries is expected to raise additional revenues between 1.2 to 1.6 per cent of GDP in the first year.

Across GCC
The UAE along with Saudi Arabia has taken the pioneering step in introducing VAT in the region. It will be implemented gradually across the GCC in phases over the next year.

The biggest concern around the introduction to tax is its impact on purchasing power and overall cost of living. Government and independent analysts have allayed fears that VAT will result in a sharp increase in cost of living.
“The impact of VAT on inflation and government revenue will vary depending on the proportion of consumption in the economy and how much of the consumption base is captured by VAT. We expect a portion of VAT to be absorbed by the supply chain,” Jihad Azour, Director of the IMF’s Middle East and Central Asia Department said.
By including a large number of items consumed by the general public in the zero rated or exempt category, the inflationary impact of the new tax has been largely muted.


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