The UAE ministry of finance declared the application of a 5% VAT charged on all goods and services in UAE coming in effect from 1st January 2018.
Value added tax or VAT, is a type of consumption tax that is imposed on a product or service. More than approximately 160 countries worldwide use value added tax as the most common method of taxation commonly used in the European Union. After a very long time of thinking, the UAE government has confirmed the implementation of 5% value added tax starting from 2018.
Many residents are being affected by this move, but the government has taken a positive step
in the right direction. UAE is running for export 2020 and by the year 2020 UAE must be self sufficient and have several sources of income other than the production of oil and tourism industry. This step is therefore taken to lead the country towards winning the Expo and making their place in the world.
Having implemented the value added tax (VAT) of 5%, it will lead to about 1% reduction in the level of consumption in the short run and to significant reduction in the long run. The UAE is a melting pot for all cultures and societies, with the number of people living in UAE and the kind of service UAE has been giving to the residents since ages; has really been something to talk about worldwide. People from all around the world tend to come to UAE and live here for a better lifestyle. However, this might change now as the 5% that has been applied and some people who fall under the middle-class or lower category have already decided to resign from their jobs and leave UAE for good.
Despite of what the people of UAE are thinking about this move, the government is very optimistic about the actions they have taken in the positive light. The achievements that have been taking place in the UAE are quite impressive and have raised the bars from what people thought of a small desert nation to an important player in the global platform.
Everything in UAE is respected for what it has achieved, and what the vision and mission of UAE carries to have. Now with the introduction of VAT, UAE is looking forward to a new era of growth and development.
While some people are not affected by the VAT, saying that it is only 5% and in their home countries they must pay above 30% tax to the government; other people are saying that the UAE government is giving them a tough time to continue living here as their salaries do not compensate for the amount of tax they will be paying.
In talks with different people, everybody has different opinions and thoughts. Anna (33) A promoter at an electronics shop in Dubai, tells us how her life has changed since VAT has been executed. “Every day I travel from Sharjah to Dubai by using three different modes of transport. I take the bus, taxi and metro to reach work. Before VAT, one side journey cost me 35 dirhams, but since VAT has been imposed it costs me 45 dirhams for one side trip. Along with travel costs, rent and food bills have increased which is making each day difficult to live here.”
The UAE is divided into two major categories, The middle pay sector and the highly paid sector. For many people their average salary lies between 2000 to 4000 dirhams. Whether to spend this money, pay house rent, arrange transportation or send money to family in their home country; is the question. “Not everybody can afford all of this and have some savings specially since the VAT. It is difficult for me and my colleagues to pay the rent and spend on travelling, after all this there is no money or very less amount left for us to spend on ourselves. VAT has created a difference and we just hope we cope up with this situation.” Says Anna.
Having said that some people are having difficulties since the VAT, many people do not fear at all. Mohammed (58) businessman, who has been living in UAE ever since it was a barren desert said “I am living here for 58 years now this place is what I call home. No such thing as tax was ever taking place here. Now that UAE has made 5% VAT obligatory, I can see for sure this is for the benefit of the people of UAE.”
UAE is getting better day by day and, yet it has much more to achieve. Mohammed says, “With the money people are paying as tax, the UAE government is facilitating its people in several ways by making better healthcare, infrastructure, roads and transport, and to give people what they want here- luxury.”
The difference between a businessman and an employee is very clear, for some people it has change their lives and for some people it is been seen in a positive light. As people compare and isolated desert to the skyscrapers in UAE now, maybe very soon people will compare UAE before and after VAT; as it has made a lot of changes in daily lives of residents who call UAE their home.
While in one-way people are getting affected due to new tax rules, on the other hand some of them are going in for a ride. All hopes are now on tax authority to step in and take necessary actions. Who knows soon there may be some more taxes, or the 5% would increase? The lives of the many people of UAE lies in the hands of the government.
Shaima Gourh – SNW News