Millhouse

I wish... it's not my money.

From what I understand, JA traffic is holding up ok (it's down but not bloodshed) - but they would say that I guess.

I know for a fact (have seen the numbers) that in other ports in the region (saudi) after a period of stagnation we are seeing growth again.

Air traffic however... Tunsia -25% year on year, although some airports are still reporting growth. I'd love to see DXB's numbers...!

Millhouse

Funny you should say this, as I sit here today on my barely usable internet connection the same thought crossed my mind... what happens when Dubai can't afford the opex. Are we going to see lights off and rubbish on the streets?

The Dubai government recently launched a US$ 2.5bn waste to energy incineration plant capable of handling 60% of the Emirates waste. It would be a 25 year concession paid for in 'installments' from the Dubai government (like a UK PFI school or road). Now that project won't happen... but the waste will still come...!

They have no oil or gas for power generation, so how on earth will they run the desalination plants, the aluminum smelter, and all the air conditioning?

The only cash generating assets the emirate has is the port, the airline and salik. All of which may have to be sold (if not already).

When western governments are in the shit they have previously sold assets, raised taxes and cut investment. Dubai has only 3 assets, will struggle to introduce taxes and has already cut investment.

I guess there will be no fireworks this NYE...

Bijilo123

I think that the number of assets is low as you say but Dubai is not doomed and can get out of this - but it will, as you say need taxes. This (the small matter of tax) has been brewing in the Middle East for a long time but no - one has introduced them other than for foreign companies (eg Kuwait taxes foreign company profits by a small amount). I have no insight into the intentions of the countries but I do believe that taxation is the way forward.

I sense that whilst USA is in deep trouble, the way out for them may be to introduce VAT as a consumption tax which at 5% for the same sort of products and services that are vattable in the UK would yield $400Billion pa by 2019. That is a lot of money and will go a long way to funding some of the social initiatives in the US such as healthcare and reduce the need to increase income tax.

Applied to the UAE obviously the scale would be different but the imposition of VAT as an extra tax would be no less painful than anywhere - but it is a good tax because it is on consumption rather than income and can offer huge inputs to the treasury. Dubai however also has the rich big brother - who lets face it will face the same issues in 30 yrs time and so will want to make sure that the Middle East oil free economic model is effective.

I agree there may be no fireworks on NYE but we are not witnessing the destruction of the UAE or the long term world economies.

captainflack

I run a company here in a free zone and we were promised 50 years of zero corp and zero personal tax. Sure they can break any rules they want, but think about the blowback of breaking such an important promise. Their promises will be worthless (if they are not already). Impose that extra cost, as well as the hassle on me, and sure I could take it. But why would I? It's not my country they're saving, I have no loyalty here because I have no rights. My business is primarily here for cost reasons, my customers are all over the world. I'll just take my business somewhere else. It's only going to kill the economy more putting taxes here because most people have little loyalty or particular desire to stay here other than for financial reasons. Bahrain and other cities would just grab the action instead.

The UAE is not going to end yet of course. That will happen soon after the oil dries up, or crashes in price for any extended period. Google 'Nauru' and you'll recognize the similarities with the UAE.

Bijilo123

I know that they have made promises on corporation and personal taxes and that the people who advise will, of course, be subject to that advise which is a cynical reason for them honouring the promises.

I was in Dxb 8(?) yrs ago when they mooted a 5% flat rate income tax and people got agitated to say the least - but Dxb was booming then.

More rationally they will see that you do have an option and whilst there is nowhere cheaper than the free zone then they will not rock the boat. I expect that there may be two sets of rules on corporation tax - free for the freezone and something elsewhere. I don't think they could do the same for personal tax.

I'm sure that it will result in VAT which is paid by the consumer effectively and does not do too much damage to industry.

Things will change but people should (as you allude) hang on; it is the climate that people should worry about - the economy will sort itself out eventually.

Millhouse

They just broke the promise of repaying their debt to multinational creditors.

Millhouse

I agree with you, VAT is a 'good tax'. In fact, I would rather see high VAT and consumption taxes than income taxes in the UK (it does have the side effect of screwing the poor thought).

Still, I think that an economy with a huge cash element to it along with the complete inability to administer such a complex system of tax will struggle to do so, in the short term at least.

Bijilo123

This is not important - the poor don't have the vote ...er

....the poor are foreign.

Inselaffen

nobody has the vote rich or poor

captainflack

I run a business in the UK too, and VAT is a pain in the backside to administer. Just because you don't sell to consumers does not mean you don't need to charge it. Everyone over a certain size must (it's not the same as a consumer sales tax).

If such a system came here, there was talk of it only applying to companies over a certain turnover. But how to prove that? Does a company simply make a declaration, or does it have to provide some kind of audited accounts? In that case, you're talking costs/hassle, which small companies really don't need at this time.

And the free zone is not cheap - DIC rents around 200 AED/sqft. If you're going to have to admin and pay tax, even a few %, then it's going to persuade many companies that Bahrain or another Emirate in the UAE is better. There are other tax-free jurisdictions outside the region we looked at when costs got out of hand in Dubai in 2008, but as the place crashed we decided to stay. But if they start to rack up the costs to us via taxes, etc. then we won't stick around when there are better choices. Especially if Dubai's financial woes start to affect the level/cost of vital services. Internet is already absurdly expensive, something like 10 times the cost of the UK for our office connection and choice of one provider. DEWA have apparently doubled the price of electricity over past couple of months and is one of the govt companies that has been downgraded. If the lights start going out, then we'd have no choice but to leave regardless.

Bijilo123

Generally you register as you said. You do not need to prove anything. You have to keep accounting records anyway and the process for ensuring compliance is the usual threat of prosecution plus inspection.

You are right about increasing costs makng a business less or unviable - but going away somewhere else only works if ther is the same market for selling into and there is a cost benefit. If the region acts in concord (yeah right) then that arbitrage is not available.

But overall I just don't think that UAE are in the same shit as other places and that the Emirates will look after their own.

Bijilo123

No kidding?

Well one of them does - (he used to be rich)!