High import fees is not the solution

In 1773, the British Parliament passed a law called the Tea Act, giving the East India Company a monopoly on the sale of tea in British colonies. It also enabled the company to impose a tax for the benefit of Britain's treasury.

This law came after American citizens managed to thwart an attempt by British colonists to impose the postal stamp tax in 1765 when Samuel Adams, an influential figure in the years leading up to the American Revolution (1775-83), began to emerge as a strong leader in Boston through his inflammatory newspaper articles.

His articles helped inspire Americans to resist the British occupation. Samuel, and his companions who were called "followers of freedom", were fed up with British taxes that added to the burden of Americans, especially those in Boston. Samuel's movement was the first spark in the American Revolution.

Any citizen in a country pays a certain percentage of his income in tax, as per the financial system in that country. This may be known by a different name in some Muslim countries, such as zakat (the Muslim wealth tax), or khums, which involves giving 20 per cent of one's money to be spent in the path of Allah.

Some times, this amount is paid in the form of fees for services which, like taxes, adds to the public treasury.

It is important that this income is included in the budget to support various projects, especially community service initiatives. The difference between these taxes, and duties and taxes levied directly by colonial authorities is that taxes levied on the community are invested in service projects for the community, as these taxes go to the treasury to finance projects in accordance with a financial system that is subject to political, administrative and public control. But taxes collected directly by the colonial power are pumped into funding projects that only serve the colonial power, not the society.

Great returns

In high-income countries that are rich in natural resources, such as oil, there are almost no taxes. Hence, foreign investors prefer to invest in these countries because they can get great returns on their investments as even the fees paid by these investors is often small, especially compared to taxes in the West, which may decrease profits.

Countries lay out laws and regulations for foreign investments, in order to protect the national economy.

Some countries that do not levy taxes, have to resort to imposing fees for public facilities and this fees amounts to a reasonable income for the public treasury.

Among such countries is the UAE, where the local authorities enjoy the power to impose fees to support local budgets. Although some federal public agencies have recently started charging for their services, they try to show themselves as law-abiding agencies so as to get a legislative cover. However, these agencies are, in general, still committed to serving the public without expecting anything in return.

Serious dialogue

Lately, new fees has been introduced in the UAE, where a serious dialogue is taking place about with the purpose of imposing a tax on imports, and maybe on some services, which will inevitably lead to an increase in prices.

This could also lead to inflation that would weaken purchasing power.

With the lack of governance in some societies, and the absence of accountability, some aspects of this inflation will be hidden, while some others will be apparent. Prices of goods and services will increase in the local currency.

In the meantime, salaries will not increase to cope with the increase in prices, adding to the burden of people whose incomes are already insufficient to meet their essential needs.

According to economic reports, inflation increases annually. Besides, fees in all areas is also being increased. Even some federal entities — such as the UAE University — have recently started charging post-graduate students.

Although such a move is in violation of the provisions of the constitution, no one — including the Federal National Council — has objected to it. An increase in inflation in a community increases the pressure on the people and leads to an exodus. But that is not true in some communities.

In the UAE the current inflation is driving away a segment of the population, mainly those working in education and health sectors, as well as those in other important services.

The increasing inflation rates and spiralling commodity prices also affect Emirati citizens with limited incomes — whose debt has accumulated as a result and who are unable to meet their growing expenses.

This inflation does not affect the other segment of population which represents the majority, as they can adapt to every situation, but would not think of leaving the UAE because the economic conditions in their countries are worse than those here. Yet, if there is a strategic plan seeking to solve the issue of demographic imbalance — by increasing prices — obviously, the plan will not work.

Khalifa Rashid Al Shaali is a UAE writer.