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VAT to positively impact UAE economy: official

* 5 per cent VAT to be introduced in UAE by 2018

* Will not have “significant impact on businesses and financial markets”

* Demand for luxury goods will be most affected by VAT costs

A value-added tax (VAT), set to be introduced in early 2018 within the UAE, would positively impact the economy, an Abu Dhabi official said.

No significant impact on business

“The proposed five per cent VAT will be applied to consumption and not on savings or investments. It will not have a significant impact on businesses and financial markets,” Rashid Al Blooshi, CEO of Abu Dhabi Securities Exchange, ADX, was quoted as saying on the UAE state news agency, WAM.

Recently, there have been several speculations about the impact a VAT introduction would have on the country’s overall economy and its level of attractiveness.

Tax-free no more?

One of the UAE’s most attractive characteristics had been being a tax-free country, a characteristic that attracted many multinational companies the expand operations in the country.

Al Blooshi announced that a panel discussion on the implications of introducing VAT for businesses in the UAE would be organised on Wednesday by ADX and the Canadian Business Council (CBC)-Abu Dhabi. The panel will address the impact of VAT specifically on stock markets in the UAE and the mechanism of calculating the VAT, among other pertinent issues.

A survey conducted earlier this year by the CFA Society Emirates revealed that 82 per cent of the respondents said the introduction of VAT will lead to higher inflation rates in the UAE.

The survey noted that demand for luxury goods will be affected the most by additional VAT costs, followed by cars, tobacco and real estate.