As the oil-rich Gulf nation of the United Arab Emirates seeks to diversify its revenue base with value-added taxation, the country is setting up a federal tax authority that will be in charge of collecting levies.
Positions that include a compliance and enforcement director, auditors, analysts, accountants and administrators are being widely advertised by the ministry which is looking out for about 30 staff positions for the tax authority on its website.
Two people familiar with the matter who spoke on condition of anonymity because the information isn’t public were quoted in the media as saying that Deloitte LLP is advising the Ministry of Finance on the structure and enforcement mechanism of the new government entity.
In the last couple of years, there has been a collapse in global oil prices. And despite the fact that taxation Bottom of Form
has long been a taboo in the six-member Gulf Cooperation Council – of which the U.A.E. is a member, the countries have been forced to rethink their stance on the issue due to depleting coffers driven by reduced oil prices. The attempt by the states is to broaden revenue collection.
Examples of this change in stance are being evidenced in the last one year. While Saudi Arabia said in June it was mulling taxing the income of expatriates living in the kingdom, Kuwait is also planning to impose a 10 percent rate of corporate taxation. On the other hand, all the members of the six-member Gulf Cooperation Council are planning to impose VAT by 2018.
There was no comment made to the media by the U.A.E. finance ministry. Its business depended on client confidentiality and it wouldn’t “discuss rumors” said Deloitte in an e-mailed answer to questions.
In the first year of its implementation of VAT, the U.A.E. expects to generate about 10 billion dirhams ($2.7 billion) to 12 billion dirhams from the new tax, Gulf News had reported in January. The duty will range between 3 percent and 5 percent, the newspaper said citing finance undersecretary Younis Al Khouri as saying.
Wider than 2015’s 2.1 percent, the U.A.E. it will post a budget deficit of 3.9 percent of economic output this year, the IMF estimates. He country booked a surplus of 5 percent in 2014.
Some major projects have been either halted or scaled back and fuel subsidies have been cut by officials of the country to ease the pressure. By the process of merging institutions from banks to universities in an attempt to cut costs, the richest of U.A.E.’s seven sheikhdoms, Abu Dhabi, has embarked on a consolidation drive.
Speculations that income tax imposition might not be that far away have been fueled by many based on the measures. But this is quite unlikely, thinks the IMF’s chief for the Middle East.
“Before we get to income taxes, there are other taxes that are probably more feasible in this current structure,’’ Masood Ahmed said in an interview in Dubai, such as levies on corporations or property.
(Adapted from Bloomberg)