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UAE Completes VAT Study

Friday, March 12, 2010

Authorities in the United Arab Emirates are inching closer to the introduction of a value-added tax (VAT).

Director General at the Ministry of Finance, Younis al Khoori told UAE paper, the National, that the Ministry had completed its study on the economic ramifications of introducing VAT in the UAE’s seven emirates, and had presented it to the Cabinet for perusal.

The tax is to be introduced to raise revenues to finance liquidity support for UAE banks, shore up Dubai’s debt responsibilities, finance infrastructure projects, and diversify the UAE economy away from oil. It will also allow the government to better control money supply.

While the UAE government has resisted giving a timeframe on the levy’s introduction, the tax's absence from the October 2009 budget indicated that it will be introduced no sooner than 2011.Last year's International Monetary Fund’s Article IV consultation with the country, recommended that VAT should be introduced within the next 2-3 years. “The introduction of VAT over the next 2–3 years should make the budget less vulnerable to oil price fluctuations,” the April 2009 report said.