Rich resources in all the right places

Investment banks are cutting staff amid mounting uncertainty in the euro zone and faltering growth in Asia. James Turley, the chief executive of Ernst & Young talks exclusively to The National about economic prospects for the year ahead.

What keeps you up at night?

When I look at the global economy I'm much less worried than I was at the depths of the financial crisis and the immediate recession that followed. We still have a multi-stage, multi-speed economy. I am concerned about the euro zone. The issues are quite complicated and beyond the simple characterisations. Everyone talks about the sovereign debt and the fiscal situation, which are obviously severe in many countries. But beneath that risk is a concern about growth across the whole region. If you are talking about the short-term dangers, a sustained period of low or no growth is very problematic.

Beneath that is the social change that is going to be necessary to be competitive. We are operating in places where people work 35 to 45 hours a week and retire in their early 50s in some countries.

In other regions of the world, people are working 45 to 50 hours a week until they are 65 and in still other regions they are working 65 to 75 hours and they never retire. This impacts competition and so I do worry about that. Are there reasons to be cheerful? North America is on the slow rebound, the spirit of entrepreneurship is strong and we are beginning to see traction of a sustained recovery. In the emerging markets, I am positive on those despite the short-term challenges.

If you look at China as an example, you are seeing GDP growth slow in large part because they can no longer count on 10 per cent growth every year by export-driven external demand. They need to rebalance that with consumer-driven growth, and they're doing that. But they need to do it faster than was planned because of the real weakness in Europe and North America. They'll work through that.

I see China, India, Eastern Europe, the Middle East, Latin America as all being long-term success stories, not in straight lines, there will be bumps along the road, but long term success.

What is your view on Dubai as a regional financial hub?

I still think Dubai has a positive future. Dubai was almost alone in the region in its global connectivity so there are more westernised hotel properties and other property being built and a lot more travel options into Dubai.

Now the region is seeing more cities and countries building to a new level of prominence. We are seeing this in different cities across the region, so I don't think Dubai will be alone in the destination space for the Middle East and North Africa.

Has it become easier to do business in Saudi Arabia?

We have seen significant changes in terms of the easing of starting up a business. It is encouraging to see the number of procedures needed to open a business decline. In the kingdom it went from about 13 procedures to about four over the last five years. The average time it takes to complete those procedures may have gone from a 60-day horizon to about five days. So it is much easier to have the capital to form a business and go out and start hiring.

How did the Arab Spring impact your business?

We are blessed with the largest market share in the profession in the Middle East and North Africa, which means when there are disruptions to economies we are impacted. A lot of new relationships are being made not just on the corporate side but also on the government side in many of these markets.

Overall, we are staying on the front foot on all these changes and we're positive about them. By operating Ernst & Young as a single business in the region, even though we are in 15 different countries here, we are able to give the right resources at the right time in the right places.

Growth in the region has been a little bit retarded by the Arab Spring-summer-fall and winter, so I think we are growing slightly less than India or China, but we are very positive.

scronin@thenational.ae

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Ten tax points to be aware of in 2026

1. Domestic VAT refund amendments: request your refund within five years

If a business does not apply for the refund on time, they lose their credit.

2. E-invoicing in the UAE

Businesses should continue preparing for the implementation of e-invoicing in the UAE, with 2026 a preparation and transition period ahead of phased mandatory adoption.

3. More tax audits

Tax authorities are increasingly using data already available across multiple filings to identify audit risks.

4. More beneficial VAT and excise tax penalty regime

Tax disputes are expected to become more frequent and more structured, with clearer administrative objection and appeal processes. The UAE has adopted a new penalty regime for VAT and excise disputes, which now mirrors the penalty regime for corporate tax.

5. Greater emphasis on statutory audit

There is a greater need for the accuracy of financial statements. The International Financial Reporting Standards standards need to be strictly adhered to and, as a result, the quality of the audits will need to increase.

6. Further transfer pricing enforcement

Transfer pricing enforcement, which refers to the practice of establishing prices for internal transactions between related entities, is expected to broaden in scope. The UAE will shortly open the possibility to negotiate advance pricing agreements, or essentially rulings for transfer pricing purposes.

7. Limited time periods for audits

Recent amendments also introduce a default five-year limitation period for tax audits and assessments, subject to specific statutory exceptions. While the standard audit and assessment period is five years, this may be extended to up to 15 years in cases involving fraud or tax evasion.

8. Pillar 2 implementation

Many multinational groups will begin to feel the practical effect of the Domestic Minimum Top-Up Tax (DMTT), the UAE's implementation of the OECD’s global minimum tax under Pillar 2. While the rules apply for financial years starting on or after January 1, 2025, it is 2026 that marks the transition to an operational phase.

9. Reduced compliance obligations for imported goods and services

Businesses that apply the reverse-charge mechanism for VAT purposes in the UAE may benefit from reduced compliance obligations.

10. Substance and CbC reporting focus

Tax authorities are expected to continue strengthening the enforcement of economic substance and Country-by-Country (CbC) reporting frameworks. In the UAE, these regimes are increasingly being used as risk-assessment tools, providing tax authorities with a comprehensive view of multinational groups’ global footprints and enabling them to assess whether profits are aligned with real economic activity.

Contributed by Thomas Vanhee and Hend Rashwan, Aurifer

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Frankenstein in Baghdad
Ahmed Saadawi
Penguin Press

Race card

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4.35pm Mahab Al Shimaal Group 3 $350,000 (D) 1,200m

5.10pm Nad Al Sheba Turf Group 3 $350,000 (Turf) 1,200m

5.45pm Burj Nahaar Group 3 $350,000 (D) 1,600m

6.20pm Jebel Hatta Group 1 $400,000 (T) 1,800m

6.55pm Al Maktoum Challenge Round-3 Group 1 $600,000 (D) 2,000m

7.30pm Dubai City Of Gold Group 2 $350,000 (T) 2,410m

The National selections:

4pm Zabardast

4.35pm Ibn Malik

5.10pm Space Blues

5.45pm Kimbear

6.20pm Barney Roy

6.55pm Matterhorn

7.30pm Defoe

Traits of Chinese zodiac animals

Tiger:independent, successful, volatile
Rat:witty, creative, charming
Ox:diligent, perseverent, conservative
Rabbit:gracious, considerate, sensitive
Dragon:prosperous, brave, rash
Snake:calm, thoughtful, stubborn
Horse:faithful, energetic, carefree
Sheep:easy-going, peacemaker, curious
Monkey:family-orientated, clever, playful
Rooster:honest, confident, pompous
Dog:loyal, kind, perfectionist
Boar:loving, tolerant, indulgent

Example heady

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The burning issue

The internal combustion engine is facing a watershed moment – major manufacturer Volvo is to stop producing petroleum-powered vehicles by 2021 and countries in Europe, including the UK, have vowed to ban their sale before 2040. The National takes a look at the story of one of the most successful technologies of the last 100 years and how it has impacted life in the UAE.

Read part four: an affection for classic cars lives on

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Read part two: how climate change drove the race for an alternative