UAE plans to implement VAT in the next year 2018 along with other GCC countries, which could generate Dhs 20 billion in the Second year and Dhs 12 Billion in the first year of implementation As per Ministry of Economy Sultan Al Mansouri.
Gulf countries planned to less dependent on oil revenues and able to generate income from non-oil sources such as VAT. This was started back in 2015 when the restriction was removed in the way fuel prices are set and surge in water and electricity tariff. Higher taxes on tobacco and taxes on other goods such as soft drink are also expected.
Dhs 248 billion of federal budget approved by UAE cabinet for the next five years, with ultimate focus on health, education and social development, expenditure are expected to be Dh 48.7 billion leaving an insignificant deficit.
Minimising dependence on oil and investing in the strategic sector will generate growth from non-oil sector. It is expected in 2020 revenue from non-oil will reach 4.6 percent as per ministry.
IMF proclaim that introduction of VAT with such low rate of 5% could earn only 1.5 to 2 percent additional to GDP of Gulf states. In OCT 2015 Fund said the Gulf States has combined fiscal deficit from 2015-2019 of more than $700 billion if they didn't take reforms.
The majority of Business professionals believe reforms such as the implementation of VAT, cutting subsidy on fuel will have a positive effect on economy and imperative to amplify the development in the region.
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