The individuals in charge of some of the GCC’s biggest companies are bracing themselves for the introduction of value-added tax (VAT) in two years’ time, according to two surveys.
Arabian Gulf ministers in February signed an agreement to introduce a 5 per cent tax on consumption to be implemented across the region by January 1, 2019.
The UAE is set to become the first GCC country to bring in the tax, with plans to impose it on goods and services from the end of 2018.
A poll of chief financial officers across the region conducted by the accountancy company Deloitte found that 93 per cent of those polled expected the new tax to have some impact on their businesses.
According to the Deloitte survey of 88 listed and non-listed companies in the Middle East, most of which had an annual turnover of more than US$100 million, almost half of those polled said that their business had a “minimal understanding" of the range of impacts typically associated with the introduction of VAT. Moreover, 81 per cent said that their businesses had not yet incorporated VAT into their financial plans.
At the same time an online survey by CFA Society Emirates, an organisation for finance professionals in the UAE, found that 82 per cent of the 68 members polled said the new tax would lead to higher inflation rates in the UAE.
“CFA professionals see VAT as a paradigm shifting reform in the GCC’s fiscal policy and are unanimous that it will lead to higher inflation," said Amer Khansaheb, the president of CFA Society Emirates.
Members predicted that sales of luxury cars would bear the brunt of the new tax, with 79 per cent of those polled believing that the car industry will be affected and 77 per cent believing that luxury goods will feel the impact more than other industries.
Respondents were even more gloomy when asked about the possibility of taxing wages, with 80 per cent saying that they would consider moving abroad if an income tax were to be introduced.
Humaid Obaid Al Tayer, the Minister of State for Financial Affairs, confirmed in February that VAT would be implemented by the end of 2018 as part of a drive to reduce the country’s dependence on oil.
At the same time he added that studies into a possible corporate tax were also under way.
The UAE is expected to generate about Dh10 billion to Dh12bn as a result of introducing VAT in the first year of its implementation, the CFA survey said.
Source: The National