Saad Maniar, the Managing Partner of the DIFC branch of Crowe Horwath audit and advisory firm, says the introduction of tax rates on UAE corporations, combined with the looming taxation on goods and services (VAT), impacts employees paycheck in several ways – some would argue, negatively.
“The introduction of VAT, which would make goods and services more expensive, will affect the ability of people to save money. Similarly, corporate tax deductions will have a significant impact on companies’ bottom lines, and eventually, its employees and shareholders will also be impacted. How? There’s a likelihood that shareholders’ returns would decrease, and staff’s annual salary increases may be scaled back,” he warns.
For many companies, investing and saving revenues for future growth is always a prudent decision. However, Saad observes that the major challenge that companies will now have with the introduction of corporate taxes is that, savings for the business will be impacted negatively, since the revenues that the business has kept aside for future sustenance would incur more taxes.
“This may discourage business owners to invest in the UAE, as their return on investment would diminish,” he says.
The economies of the GCC countries rely heavily on revenues from oil and hydrocarbon products. In the recent months, these countries’ budgets have suffered a dent, battling plunging oil revenues compared with a couple of years ago, when oil prices were over $100 per barrel compared with around $45 currently.
The six-member nations, in a meeting recently in Doha, Qatar, all agreed to push toward the introduction of a VAT and corporate tax around the region, in a sign that low oil prices may be strengthening support for the tax idea.
