80% of Professionals Will Leave GCC if Income Tax Introduced
VAT in the UAE will bring higher inflation, society of finance professionals says
An overwhelming majority of finance professionals would leave the Gulf Cooperation Council (GCC) if income tax was implemented, research has revealed.
In a study by CFA Society Emirates, 80% of the respondents said that they would consider moving abroad if the measure was introduced.
59% said the GCC’s tax-free environment was a Key factor in their decision to move here.
On the corporate level, more than 50% of employers would not relocate if corporate tax was introduced.
Earlier this year, IMF Managing Director Christine Lagarde told finance ministers at the Arab Fiscal Forum in Abu Dhabi that it was time for Gulf states to introduce more taxes, including corporation tax, property tax and excise duties. The region should also prepare itself for personal income taxes, she added.
Of the Gulf states, only Kuwait and Qatar ran deficits below 10% of GDP last year as Crude Oil prices dove to less than 30 bbl in January following Y 2014 highs of 110 bbl.
The United Arab Emirates (UAE) has already unveiled plans to become the first GCC country to introduce VAT (Value Added Tax), which will be implemented in Y 2018.
Ahead of this, 82% of CFA respondents said VAT would lead to higher inflation rates, with the luxury goods and automobile markets most affected, alongside tobacco and real estate.
The association of finance and investment professionals said that healthcare as the sector will be least impacted by the additional VAT costs.
All of the respondent said they felt consumers would bear the cost more directly than retailers.
CFA Society Emirates president Amer Khansaheb said:”The short-term impact will be offset by the long-term benefit VAT will bring to the regional economies. There is an urgent requirement to diversify government revenues, which are currently still largely dependent on income from Crude Oil and Nat Gas, and VAT is a measure that will allow more stability given that the outlook for crude prices remains volatile.
“Additionally, VAT would encourage more responsible consumer spending patterns and prices would have to be reduced in order for demand to match this trend; which would eventually lead to a decrease in inflation rates.”
The UAE is expected to generate around Dhs 10 to Dhs 12-B from the 1st year of VAT implementation.
- By Eleanor Dickinson
Paul Ebeling, Edtor