The duty of financially supporting a country’s government and infrastructure should belong to its citizens and residents. It should not belong to tourists.
This is what makes last week’s decision by the UAE Cabinet to allow tourists to receive a refund on the 5 per cent value-added tax (VAT) they pay for goods an services such a critical one. The decision moves the burden of taxes back to those who live here and removes an obstacle that has impacted the UAE’s tourism and hospitality industry.
But the decision to allow refunds, which will be overseen by an international firm that specialises in tax recovery services, linking retail outlets and designated tax refund points, isn’t the final step. If the UAE is truly to implement international best practices regarding VAT, the country’s hotels and retailers, which includes everything from restaurants to theme parks, must ensure that they are conversant in all VAT regulations and procedures that enable tourists to avoid any inconvenience in recouping their money.
This should be an easy adjustment for the country’s hotels. Many of the county’s biggest hotels are managed by international chains that will have experience in meeting regulatory compliance. Local chains will need to ensure they do not lag behind in implementing VAT refund procedures or they will face an economic disadvantage from consumers looking to stretch their holiday pounds, euros, rupees and dollars in the current economic climate.
Retailers in particular will need to ensure a timely implementation across all sectors. While the government was forgiving in the implementation of VAT by companies due to their lack of experience in dealing with tax regimes, international tourists will not be so patient with their refunds, especially if the refund had been a factor in their choosing the UAE as a destination.
Some companies of course will be faster in figuring out these new regulations, but time is of the essence here. In a world where tourism and consumers in general can check prices and reputations with a quick online search, retailers who fail to offer VAT relief fast and efficiently enough will likely face a backlash.
This cannot be allowed to happen as the bad reputation of a few companies could result in a negative impact on the UAE’s hospitality and retail industry overall, which would be difficult to fix in today’s hyper-critical cyber environment. The Federal Tax Authority needs to instruct and push companies to implement the new rules quickly and accurately.