Abu Dhabi: The UAE is expected to make around Dh10 billion to Dh12 billion as a result of introducing Value-Added Tax (VAT) in the first year of implementation alone, according to Younis Al Khouri, undersecretary at the country’s Ministry of Finance.
“There was a study conducted in 2014 that showed that the [revenues] collected from the implementation of value-added tax for the UAE are between Dh10 billion to Dh12 billion given that the tax will not be applied on some large industries like education, healthcare, and food staples,” Al Khouri said.
He added that the VAT is set to be implemented in 2018, and would range between 3-5 per cent, but GCC countries are yet to finalize their implementation policy.
The tentative plan for the tax implementation has already been approved, however, by leaders of the GCC countries, the undersecretary confirmed.
In early December, Al Khouri said that GCC countries have just agreed on key issues for the tax implementation, moving the states closer to introducing direct taxation for the first time as regional governments see growing challenges from falling oil prices.
He also said that the VAT would exempt certain sectors such as healthcare, education, social services, and 94 food times.
Certain industries such as financial services are yet to be agreed upon by the GCC countries.
What's excluded from VAT
The UAE is still in the preparation phase for the law that would introduce the Value-Added Tax (VAT) in 2018 that would range from three to five per cent, according to Younis Al Khouri, undersecretary at the country’s Ministry of Finance.
While GCC countries are yet to finalise their policy on implementation, certain sectors such as healthcare, education, social services, and staple food items are going to be excluded from VAT.
Speaking to reporters on Wednesday, Al Khouri said that it would take two years for the law to be implemented once it is issued.
He was speaking on the sidelines of the Undersecretaries of Arab Ministries of Finance’s meeting in Abu Dhabi. The meeting aims to boost cooperation between Arab countries specifically in economic and social issues.
In his speech at the meeting, Al Khouri discussed falling oil prices, which hit new lows below $30 a barrel this week.
“Arab oil-exporting countries are one of the largest blocs to be affected by lower oil prices as the oil sector in these countries is a primary income source, accounting for around 80 per cent of government revenues and nearly 49 per cent of gross domestic product,” he said.
Al Khouri pointed that Arab countries need to find new ways to reduce reliance on oil as such a drop in its prices results in slower economic growth and challenges in fiscal balances. He added that Arab countries will need to work on reducing costs, and focusing on improving investments and capital spending.
Challenges in the region’s economies were a key focus at the meeting where Sulaiman Al Turki, undersecretary at Saudi Arabia’s Ministry of Finance, said that emerging economies are now facing increasing hurdles.
He pointed that a change in the US’s fiscal policies (referring to the interest rate hike from the Federal Reserve) coupled with growing consumption in China were putting a dark cloud over many countries, risking an economic slowdown.
Also speaking at the meeting was AbdulRahman Al Hamidy, director general and chairman of the board of directors at the Arab Monetary Fund (AMF), who said that unemployment levels in Arab countries are twice as high as those in other countries.
“Unemployment in the Arab world is one of the biggest challenges we’re facing, and the reason behind it is the high percentage of youth. But youth also present an opportunity especially if we try to focus on the Small and Medium Enterprise sector,” he said.
Al Hamidy said that the AMF expects Arab economies to see a growth rate of roughly three per cent in 2016, but that a higher growth rate of 5-6 per cent was needed in order to see significant decline in unemployment rates.
