Wednesday, February 15, 2006

Is a VAT in UAE's future? :: Gulf News
K.I.S.S. -- Dubai is a business park

"Soaring asset prices and emerging inflationary pressures warrant close monitoring," the IMF said in its last report on the UAE. "The sustainability of the UAE's growth prospects hinges on continued implementation of structural reforms and maintaining financial stability," the IMF added.

As a remedy, IMF recommended that "the revenue base be broadened to reduce reliance on oil and gas revenues, including by introducing a local property tax and a value added tax, the latter in coordination with other members of the GCC."
A "Dubai-based investment adviser" says,
"This will fuel inflation and the general public will suffer. Employees will demand higher pay to cope with the added expenditure that will impact overheads, reducing the bottomline," . . . "In the long run, the main attraction of living and doing business in a tax-free environment like Dubai's will disappear."
The Gulf News reporter opines:
The move, aimed at diversifying Gulf countries' revenue stream and reduce dependency on oil, comes at the right time for Dubai, whose oil output is waning.
My view: Dubai's economic strategy is to be a well run business park where the business park ownership is compensated by the tenants. A VAT would be one form of compensation. If we don't like it we can relocate to a park outside of Dubai, in the UAE or otherwise. If Dubai continues to provide great business park services the we will probably stay.

UPDATE: See Keefieboy's post for insight into the likelihood this going to happen any time soon.


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