A Little Bit Of Gas A Little Bit Of VAT

(Photo credit: Wikipedia)

We got back off leave to the much-awaited introduction of Value Added Tax in the UAE. VAT is very much a fact of life in the UK, where it is charged at a charming 20%. The UAE's 5% pales in comparison but it remains that most unwelcome of innovations - a tax.

Living for 25 years in a 'tax free' environment has been something of a privilege, I know. It has long amazed me that here we have an economy capable of functioning (and no, it's not about oil) without gouging its citizens for 25 or even 40% of their earnings. When you look at how little you get back from the UK government for all the taxes, fees and levies we pay, the UAE model is pretty compelling stuff.

But last year we saw the soda and fag tax (no bad thing, mind, although it does rather tend to hit one hard in the Fevertrees) as well as a rise in the property registration 'fee' in Sharjah from 2 to 4 per cent (because a payment to government leveraged as a percentage of a transaction is a fee and not a tax, you understand) and now the dreaded VAT is here. The background noise of expats moaning has increased as a consequence, but there's no doubt that it has sneaked a lot of cost overnight into a life already become more expensive.

VAT was the last thing on my mind the other night as I was cooking dinner, especially as the gas started to gutter. Having refused Sharjah Electricity and Water's cunningly worded invitation to give them Dhs 1,000 and the blood of our firstborn each month thereafter, we still rely on Fast, Faster and Faster Than Fastest gas and they duly rocked up soon after my call. Dhs130 for the gas and Dhs7 VAT, the chap informed me as he rolled the cylinder around to the back of the house. Tired and frustrated by the derailing of my sumptuous gastronomical event, I paid without demur. Only later did I stop to reflect that the wee swine had a) rounded it up to the nearest dirham b) taken VAT in cash without offering a VAT receipt. Guess where that Dhs7 is going (and I'm betting it's not the MoF!)?

I must confess I'd expected the introduction of the new tax to be an Emirates ID style disaster and I appear to have been wrong in that - things seem pretty fluid in comparison. The overhead for businesses, mind, is significant. Not only is there the additional cost on 'value added', but the auditing and compliance costs are significant. One aspect I hadn't considered was outlined to me by a pal the other day - cashflow. Her business tends to run on big ticket contracts and payments rarely take place within 90 days. Paying VAT on each quarter's invoices means she's going to take a huge hit up front.

That's not going to worry the lads over at Faster Than Fast, of course. Firmly embedded in the cash economy, they're likely laughing all the way to Al Ansari to send all that lovely VAT back to Swat to fund the construction of legion sprawling mansions...