A senior official at the Federal Customs Authority Saeed Khalifa Saeed Al Marri, Deputy Director-General of the UAE Federal Customs Authority, was quoted by Bloomberg as saying that the introduction of a three per cent value added tax might not be possible unless all six GCC countries adopt the system together: “VAT has not yet been approved. The government is studying the impact and wants to know all the positives and negatives so it might not do it at all, may be by 2010″ .
Dubai Customs Director-General Ahmed Butti Ahmed said in June that federal lawmakers were drafting legislation for VAT’s implementation early 2009. “All the details and the date of introducing the new taxation system are yet to be finalised at the federal level.”
“If we reach the point where it might come into effect, that means we have to study all the procedures, because it will affect the customs union and it will affect even the whole customs work in the UAE,” Al Marri was quoted as saying.
Butti Ahmed also sought to allay widespread concern that VAT would aggravate inflationary pressures. According to him, revenues from the new VAT system would match that from customs duties which are to be phased out when the new taxation is implemented. “The VAT system would not have any negative effect on our inflation rates,” he commented.
Market analysts said the removal of customs duties is inevitable under free trade agreements which the UAE is entering into with other countries. The system would bring a lot of benefits to the UAE as it is highly transparent and accurate, they pointed out. According to experts, VAT also would not have any negative effect on foreign investments because foreigners are used to such taxation systems and they prefer to operate under the umbrella of this system instead of being subject to unclear taxes.
