Thursday, 8 May 2008


Blithered on the radio again this morning: was on after an excellent segment with a straightforward and helpful Abdul Rahman Al Saleh, executive director of Dubai customs being interviewed by Brands and Malcs.

Driving away from the studio, I started thinking about all the very many aspects of this we hadn't talked about. The introduction of the 'T' word to the UAE is an immense move in so many ways. We're supposed to be living in a tax free environment, dammit! We're looking at (according to Abdul Rahman) 'under 5%' tax. But even a 3% tax will be added on to every single transaction in every supply chain. Every time a transaction takes place, there'll be a 3% loading: from importer to distributor, from distributor to vendor, from vendor to service provider, from service provider to customer: every one of those transactions will presumably attract a 3% charge. To paraphrase: 3% here, 3% there; pretty soon you're talking about real money.

It will also, presumably, mean that locally produced goods will also be taxed, which they weren't before. And fresh foods, which didn't used to be dutied under the old customs regime, will now attract that 3% charge. As will school fees. I'd be interested to see what the costs of infrastructure and implementation by retailers and government alike will be: there's currently no tax collection mechanism, particularly not a transactional one. Will we see the introduction of tax returns for businesses? Perish the thought!!!

The talk is that the tax is set to be introduced in 2009. On top of spiralling rents, a dollar-linked currency weakness and a wicked burst of inflation across every area of the market, these are indeed taxing times!


bb said...

Am I missing a point or the VAT paid to your supplier is supposed to be deductible from the VAT you have to pay on the "value added" to your clients?

It should not be 3% more everytime a product changes hand but roughly 3% on the total final sale price, since everyone in the supply chain will deduct previously paid VAT.

Unless it's different in the UAE than every other country in the world of course. :)

moryarti said...

Well, atleast they are being honest about it for a change and actually calling it a TAX, not a Fee; a la the already exisitng "fees" system: housing fee, road fees, congestion fees, government fees..etc.


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