UAE VAT Introduction Worries Expats And Emiratis Alike

Expats and Emiratis alike are concerned about the effect VAT will have on their living expenses.

The introduction of VAT across the UAE and its effect on consumer prices is worrying residents in the emirates, according to a recent survey. Some 44 per cent of respondents fear they may not be able to afford to live in the same style after factoring in the increased cost of products, and 51 per cent are somewhat concerned but feel they will be able to adjust to slightly higher costs. Only 3.6 per cent of those who participated in the survey said they had no worries about increased costs.

Author of the survey Jonathan Rawling told reporters the introduction of VAT is a positive move for the UAE government, as it will help with diversification of the economy away from its dependence on oil revenues. He added the majority of UAE residents seem to be viewing VAT as an additional but short-term expense which can easily be dealt with, adding the stabilising effect of the emirate’s economy hasn’t yet been understood by most people.

Rawling believes once the initial shock of what is effectively a five per cent increase in living costs has worn off, the true benefits of VAT such as improved business confidence and better government services will be made clear to residents. One mitigation factor would seem to be that 62 per cent of those surveyed are expecting a salary increase some time in 2018, with 32 per cent sidelining a major purchase such as a house or car during 2017.

Of the respondents, 39 per cent will make a major purchase this year even although sales taxes may well apply. Given that VAT is a totally new concept to residents who’ve not experienced its effect elsewhere, expats from countries which have seen sales taxes rise as much as 300 per cent from their initial introductory percentage have good reason to be concerned. UAE residents may have a huge shock awaiting them over the next decade or so, as it’s been shown that, once governments realise the financial benefits of increases, any excuse to hike the tax will do.