alfrombarking

Thoughts on this?

Millhouse

Vet spelt wrong?

Been talked about for years. Required GCC agreement which will be as unlikely as a single currency despite them all being pegged to the same reference point. I might be wrong but I think it will still be a few years off.

VAT is a very difficult system to administer.

alfrombarking

and I'm sure VAT scams will be imported here from you know where...

Millhouse

Exactly. VAT has been discussed here for years (over 10) - until record keeping and the administrative system improves it will not function properly.

Of course - they may just lump on a sales tax at the end of the consumption chain and call it VAT. I suspect that is more likely, than a proper VAT system with reclaims etc.

VAT requires a cultural shift where money that hits a bank account would be returned. I don't see this happening.

Bahtatboy

Yep, and the whole notion of VAT is that you have an army of unpaid tax collectors. No doubt in UK (and elsewhere) the cost of mistakes, theft and poor administration by those collectors is factored in, and still the system works. What would be that cost in the GCC?

Maxima

UAE’s introduction of VAT will bolster the country’s global competitiveness | The National

VAT will be good for us

First, the standard theory assumes that consumers reduce spending, as they have reduced means to do so. For instance, they are laid off or have lost a lot of money in a stock market crash. That is not true in the case of the UAE. If the VAT increases prices of luxury goods, then who says that the wealthy will not have the means to continue spending?

Bahtatboy

That's almost down to Daily Mail standards. 4 sentences, each wrong, illogical or based on a false premise. It's so wrong it's brilliant.

scrubbedexpat141

Final part isn't completely wrong though. People will continue to spend if they have the means to do so.

Millhouse

"...taxes do not take money out of the economy, they just transfer funds from the private sector to the public sector. If these funds are squandered on bloating the government, then taxes are bad. If, on the other hand, these funds are invested for continued growth in areas such as infrastructure and social services, then taxes are good."

I wonder where the money will go.

VAT will cause an inflation spike here. I also kind of doubt it will reduce spending much - after all, there are no other alternative options and UAE residents are so used to overpaying for everything... oddly though as expensive as we all find the place, compared to many other places a lot of high-end stuff is actually rather cheap compared to the rest of the world.

All that said, I assume they will start with 5% and not go straight for 20%.

I also doubt it will be a proper VAT system - imagine doing the accounting for a disposable plastic bag*. It will be a sales tax system.

* this is my favourite VAT example - each person in the production and supply chain charges VAT to the next as there is value addition in manufacturing etc. Each subsequent buyer reclaims its VAT under the rules until the item is actually given away to the end customer - therefore no final VAT is charged. It is just an exercise of moving money in and out of the government. I can see that all working so well here.

Bahtatboy

It's wrong inasmuch as nobody in their right mind would posit that the wealthy in UAE would be affected by imposition of VAT. Therefore it's based on a false premise.

scrubbedexpat141

I see what you were getting at.

Meow

Much as I generally pains me to do so I agree with Millhouse, it'll most likely be a sales tax.

The unfortunate consequence is that such taxes have a larger impact on the lower paid. Those of us with higher income can spend less on brunches and "luxury" goods but everyone needs to buy food and water.

Millhouse

I knew you'd come around to the alpha male eventually. 😄

Millhouse

I actually really like these sort of taxes. They allow people to opt out of paying them. Of course I'm hoping that food, water and fuel would not be included in the system.... But I suspect greed will overtake rational thinking as is so common here.

Bahtatboy

Most people look at you slack-jawed if you say that paying VAT's optional. Perversely, I'm happy to pay VAT when I'm in UK, since it contributes to the system in which my family live. I wouldn't be so keen to do so in the UAE because I can imagine how badly planned and executed it would be.