New Direct And Indirect Taxes To Be Imposed in UAE
A mix of new direct and indirect taxes will be levied in the UAE and GCC in the near to medium term because oil prices are expected to remain low, necessitating the creation of new sources of revenues to fund budgets, say tax experts.
They said new taxes could be levied on wealth and property, as well as corporates, while income tax will also surely come but it will be introduced at the far end in the UAE and GCC. More importantly, new taxes will come in phases rather than being implemented in one go.
Dr Rasheed Al Qenae, head of tax at KPMG Middle East and South Asia and managing partner at KPMG Kuwait said that the GCC region is at the elementary stage of tax education and the governments will have to look at other sources of funds.
“In 10 years, we expect wealth, property and asset taxes can be levied in the region because it is not that the governments want to impose but because they will have to. They will come gradually and take time. Now governments are focused on introducing value-added tax across the region. Once that is stabilized, they will think about others,” Al Qenae said in an interview.
He said the luxury tax could be also be introduced in the medium term.
“First it is going to be VAT and then on top of that will be a luxury tax. This is very clear in developed markets and it is called a luxury tax,” he said, adding that the contribution of taxes to the GCC budget will substantially increase in the next five to 10 years.
The UAE, Saudi Arabia and Bahrain have levied 5 percent VAT on goods and services. The UAE has also levied 100 percent tax on tobacco and energy drink and 50 percent on carbonated drinks. From December 1, this sin tax will be expanded to shisha and other drinks that will contain sugar.
In the space of direct taxes, Rajiv Hira, director at RHMC Management Consultants, expects federal level corporate income distribution tax – i.e. tax on the distribution of income/profit, dividend, etc – could be levied in the UAE with a larger and expanded tax base.
“In the space of indirect tax, we should be expecting an expansion of industry [based on global presence], for example, gaming, racing, exotic clubs, etc, and the resultant expansion of sin tax on those products/services. It’s too early to say by when, however, this is a balancing act of being global and connected with the roots,” he added.
