Dubai VAT Tax Spurs Expat Budget Plans

Residents and expat in

are counting the dirhams and becoming budget conscious after Monday’s five per cent VAT implementation.

VAT of just five per cent may sound like a very small sum, but totalling up the amount due on a month’s purchases can result in an unpleasant shock for those unused to budgeting. Expats and residents alike are expected to cut down on their spending as the extra charge bites into salaries. One expat who’d been resident in Dubai for eight years told a local newspaper she’d always been aware of VAT as an issue and had already started to adjust her spending to take the new tax into account.

For expat professionals living and working in the emirate, the imposition of VAT will have come as no surprise as it’s been charged at much higher rates for decades in their home countries. However, many seem to be calculating the effect of the new tax on their monthly income and adjusting their budgets as a result. Unlike in many Western countries, the tax includes foodstuffs and treats such as ice cream, making its effect feel like a five percent drop in salary.

Several expats said they were planning to cut down on non-essentials and expenses they can’t control as well as applying common sense to reduce their electricity bills by shutting down air conditioning during the cooler winter months. Some are hoping a salary increase will take care of the five per cent, and others are determined to cut out snacks they don't need such as crisps and junk food. One creative thinker said he’d now only buy from stores which offer discounts in compensation for having to charge VAT. A few food stores haven’t yet added VAT to purchases, and are expected to become very popular over the next few weeks as a result.