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In opposition to corporate tax in the UAE: “Taxes are not an option”

As an internationally awarded tax advisory corporate service provider, the GWS group takes an alternative stance on the subject of corporate tax in the UAE.

Countries around the world are facing major challenges and associated economic consequences as a result of COVID-19 This offers the UAE a unique opportunity to secure long-term prosperity and to further position itself as a stable location The introduction of corporate taxation or an increase in VAT, will inevitably lead to price increases, as entrepreneurs will be forced to pass on the burden to the end consumers

Article by GWS Group

The GWS group takes an alternative stance on the subject of corporate tax in the UAE. As an internationally awarded tax advisory corporate service provider, the GWS group have offered their expertise and professional advice with the following statement:

“Over the past decades, the UAE has been able to find an unprecedented and unique path in becoming an international renowned investment location and financial center. This positive development must be promoted continually and sustainably in order to not risk losing attractiveness compared to other jurisdictions and in order to ensure attractive framework conditions and legal security for investors in the future.

Countries around the world are facing major challenges and associated economic consequences as a result of COVID-19. This offers the UAE a unique opportunity to secure long-term prosperity and to further position itself as a stable location. This opportunity should not be wasted.

There are isolated voices in the news that support the introduction of company level taxation as well as personal income tax. “We believe that this creates great uncertainty among international investors and wealthy residents,” says H.H. Count of Wurmbrand-Stuppach, CEO of GWS Group, who argues that taxes are not an option. 

H.H. Count of Wurmbrand-Stuppach, CEO of GWS Group

The introduction of corporate taxation or an increase in VAT, will inevitably lead to price increases, as entrepreneurs will be forced to pass on the burden to the end consumers. Inevitably, this will lead to a loss of purchasing power for the entire population, and furthermore, a decline in economic growth. Rising costs due to new/increased tax will have a direct and immediate impact, especially in key industries such as tourism and real estate, which will significantly and permanently reduce the attractiveness and competitiveness of the location.

Read: UAE firms fear spike in payment defaults as pandemic chokes business

To continue, the tax contribution of small and medium-sized companies and family businesses is not of great relevance for a state budget. International companies, personnel-intensive industries and service providers will give priority to the location that offers the most attractive framework and legal certainty. Possible taxation of these companies will inevitably result in cutting back on-site investments or moving business to other attractive countries. As a result, this will lead to the loss of investments, jobs and economic growth. “The potential tax revenue will hardly be able to compensate for this loss,” said CEO, H.H. Count of Wurmbrand-Stuppach.

The same applies to the individuals. The tax revenue of most workers and employees is too small to have a significant impact on the state budget. When taxing wealthy expats who have chosen the UAE as a second home due to the tax advantages, the introduction of a tax will lead to unprecedented emigration.

Many countries are already advertising internationally and attracting wealthy individuals by offering tax exemptions or a very attractive lump-sum tax. Therefore, the UAE is not only competing with small islands but also with countries such as Switzerland, United Kingdom, Cyprus, Italy, Hong Kong, Singapore and Monaco – to name but a few. 

A migration of this consumer-oriented society would therefore have a serious impact on the entire economy. The job market will have a drastic drop in demand, which consequentially, will lead to a decrease in demand for real estate.

“The United Arab Emirates must face this challenge to emerge stronger from the crisis and to prove once again to the world that UAE has a sustainable recipe for success that will ensure growth and prosperity in the coming decades. This requires innovation and attractive framework conditions,” says Count of Wurmbrand-Stuppach.

A theoretical calculation of tax receipts will consequently not be able to prove itself in practice if this leads to an exodus of companies and residents. Count of Wurmbrand-Stuppach continues: “This would send a wrong signal especially in a time of great challenges and would endanger economic growth and positioning as an international investment location. In order to remain successful in the future and benefit from the crisis, the UAE should rather expand the attractive framework and incentives to bring investors into the country.”

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