The introduction of VAT in the UAE may raise up to 1.7 per cent of the country’s gross domestic product, the rating agency Moody’s said.
“The implementation of VAT in the UAE marks a positive step towards revenue diversification,” said Thaddeus Best, a Moody’s analyst and co-author of the report.
The UAE's 5 per cent VAT on goods and services introduced on January 1, may raise up to Dh24 billion per year in additional revenues for the country although take-up is likely to be lower in the first few years, Mr Best said.
Under VAT rules, the federal government will retain 30 per cent of the revenues, with the rest distributed across the emirates, according to an yet to be announced sharing formula.
“Depending on the structure of the formula, it could potentially have redistributive effects for the less wealthy emirates such as Sharjah,” the report said. However, this would be an indirect outcome, it added.
VAT implementation has had only a "modest" impact on inflation, the agency said and any inflationary impact on household purchasing power has been mitigated by zero-rated and exempt items (such as certain educational, healthcare and transport services in the country as well as the first sale or rent of residential buildings), and by deflationary trends in the real estate market.
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Read more:
How VAT in the UAE will affect you
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Moody’s said the exemptions and zero ratings announced by the government this year had a minimal inflationary impact on sectors such as health care, education and housing. Price increases in sectors such as transportation were also “relatively benign”.
A draft law under consideration to introduce federal-level debt issuance “would not represent a significant shift in the fiscal structure of the UAE”, the report added. The main beneficiary would be the local banking sector, which would receive a stable supply of high-quality liquid assets.
Business Insights
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NEW ARRIVALS
Benjamin Mendy (Monaco) - £51.75m (Dh247.94m)
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Danilo (Real Madrid) - £27m
Douglas Luiz (Vasco de Gama) - £10.8m
Company%20Profile
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Singham Again
Director: Rohit Shetty
Stars: Ajay Devgn, Kareena Kapoor Khan, Ranveer Singh, Akshay Kumar, Tiger Shroff, Deepika Padukone
Rating: 3/5
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What is double taxation?
- Americans living abroad file taxes with the Internal Revenue Service, which can cost hundreds of dollars to complete even though about 60 per cent do not owe taxes, according to the Taxpayer Advocate Service
- Those obligations apply to millions of Americans residing overseas – estimates range from 3.9 million to 5.5 million – including so-called "accidental Americans" who are unaware they hold dual citizenship
- The double taxation policy has been a contentious issue for decades, with many overseas Americans feeling that it punishes them for pursuing opportunities abroad
- Unlike most countries, the US follows a citizenship-based taxation system, meaning that Americans must file taxes annually, even if they do not earn any income in the US.
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If you go
Where to stay: Courtyard by Marriott Titusville Kennedy Space Centre has unparalleled views of the Indian River. Alligators can be spotted from hotel room balconies, as can several rocket launch sites. The hotel also boasts cool space-themed decor.
When to go: Florida is best experienced during the winter months, from November to May, before the humidity kicks in.
How to get there: Emirates currently flies from Dubai to Orlando five times a week.
The specs
Engine: Four electric motors, one at each wheel
Power: 579hp
Torque: 859Nm
Transmission: Single-speed automatic
Price: From Dh825,900
On sale: Now