By Abraham Jonah, Managing Editor, Middle East
(Sundiata Post) — In recent years, The United Arab Emirates (UAE) and Dubai in particular have been seen and recognized as one of the fastest growing business hubs in the world.
The country hosts over 150 nationalities that flow in for tourism and other business engagements as well as investments.
This influx of ‘millions’ is not just tied to tourism; but the safety of life and properties, jobs, accommodations as well social amenities has made many settle as residents in UAE for years.
The introduction of Value Added Tax (VAT) has however raised some ‘dust’ among most residents, workers, business owners and intending investors, as to whether it will impact negatively on cash-flow or not. Many are a bit apprehensive at hearing that the once tax-free economy has become a tax-bound one.
As I navigate a research on “The Post-2020 UAE Era: Economic Impact and Way Forward for Businesses”; taking a look from the past few years, I may say that oil and gas has got to do with this VAT. It is not unconnected. What the UAE (being an innovative economy) simply crafted is a look at alternative means of revenue generation; to keep the GPD up-swinging.
The UAE GDP swung from $14 billion in 1975 to over $380 billion buoyed by the economic development via oil and non-oil sectors and there is need to keep it on with or without the oil.
It is worthy to note though, that the VAT is not only a UAE ‘thing’. In fact, beyond the GCC; many countries pay VAT on most or every transaction for goods and services. If UAE had introduced VAT from the beginning, people could have been used to it and it would not have raised the myriad of questions people are asking today. Am sure the UAE still deserve some kudos for running a tax-free economy till 2017.
Yes, I will say again that the oil nose dive or crude oil price doldrums, has to do with this; but rest assured, the UAE will invest the VAT inflow judiciously on amenities and other things, for the benefit of all.
Will it affect circulation of money in UAE?
Well, I may not totally agree with most some expert assertion about this. Not all products and services are taxable and not all businesses are expected to register immediately. There are categories of companies. I will advise every business owner to check properly with the UAE Federal Tax Authority, to know what to do and avoid unnecessary tensions and kinds of emotional war that should not come up at all.
Money is very much in circulation. VAT or no VAT, Economics have proved over years that human needs are insatiable. As income increase, wants, needs, buying power, budget and expenses go on the rise. Agreed that the low income earners in UAE may be complaining more about the VAT, but let’s not forget that the average poor may still remain poor, while the average rich get richer. Why? It is not about how much residents in UAE earn monthly, and not about the VAT but about some people’s attitude towards spending without planning and priorities.
Many people will still spend more on products and services that are not taxable by this new law and many will still spend more on products which are harmful to health, even if government introduces 200% VAT on those. Research has proved that some people take pleasure in what can kill them and with the addiction, they give in to such ‘habits’ or products finally it finally kills them. Smoking is one of such products. It kills. Please avoid it.
It is beyond the VAT. It’s about attitude. People’s attitudes determine their altitude in life.
How should people react/adjust to this?
The VAT has been implemented and become a reality to live with. I will advise people to adjust to the new system and keep life and business moving.
There is already salary increase in one or two emirates. Salary increase may also be enacted and implemented for all expatriates. Who knows?
It may be financially inconvenient for now, but life can still be easy if we can try to focus more at the good side of it and the benefits people enjoy in UAE.
Most importantly, I encourage people to mix up and make friends with achievers and walk their ways through. Strategize; carefully plan before you spend even AED1. Every money counts. I teach EMBA students that Time is money and money is time.
Invest your time wisely and get more information, because the gap between where you are now and where you ought to be is time and information.
Learn more, build your intellectual capital and always be prepared to take up new challenges – when opportunities meet preparedness, success is inevitable.