It will take around three to five years to collect the required data for the assessment of the impact of the Value Added Tax (VAT) on the UAE’s Gross Domestic Product (GDP), according to a UAE minister.

Hamid Obaid Al Tayer, the Minister of State for Financial Affairs and Chairman of the Board of Directors of the Federal Tax Authority (FTA) told members of the Federal National Council (FNC) on Tuesday that it was too early for the government to evaluate the impact of VAT to the country’s economy because of insufficient data.

“It requires a period of three to five years to study the impact of VAT on the impact of the country’s economy,” said Al Tayer. “We need ample time to compile sufficient data to evaluate the effects of the tax. The only study that was conducted in 2018 in just not enough. It’s therefore too early to rely on such data to assess the impact of VAT.”

The minister was responding to a question from Hamad Al Rahoumi, first deputy speaker of the FNC and a member representing Dubai about the effects of VAT on the economy, the consumers and traders two years after its implementation.

A five per cent VAT was introduced in UAE from January 2018 and the impact of the tax is yet to be known.

“There have been many challenges, including the low oil prices, geopolitical factors, sanctions imposed on certain nations and now the coronavirus outbreak. All these factors have to be taken into account when assessing the impact of VAT,” said Al Tayer.

He noted that there was no plan to increase the amount of VAT being charged on goods and services as the International Monetary Fund (IMF) recently recommended.

Last year, the IMF suggested that the VAT should be doubled from five per cent to 10 per cent in Saudi Arabia in consultation with the other Gulf countries.

Al Rahoomi told Khaleej Times on the sidelines of the FNC meeting that he raised the issue following mixed reactions from people about VAT and that it was necessary that the concerned body come up with a comprehensive survey on the effects of this tax and its benefits to the nation.

“VAT and other government fees has led to businesses increase prices of various goods and services thereby affecting consumers,” said Al Rahoomi.

UAE’s GDP to increase in 2020

The state minister also noted that the country’s GDP is expected to increase to Dh1.50 trillion in 2020 from Dh1.46 trillion in 2019, an increase of nearly Dh37 billion.

“Last year, the inflation rate was 1.5 per cent. The GDP in 2018 was Dh1.44 trillion and inflation was 3.69 per cent,” said Al Tayer, adding that the country’s GDP in 2017 was Dh1.41 trillion and the inflation was 1.97 per cent.

In 2016, the GDP was Dh1.41 trillion and the inflation rate was 1.61 per cent.

Al Tayer said the UAE is currently witnessing an increase in investment opportunities, which was reflected in the increase in the number of companies registered under the tax system, which is 312,000 companies.

Source:https://www.khaleejtimes.com/business/banking-finance/assessment-of-vat-impact-to-take-3-5-years-uae-minister