VAT effect on Economy

The implementation of Value added tax (VAT) will not affect the consumer but also have a broader impact on companies. Since the announcement has been released a concern have been raised about the cost of running business and readiness of vendor for the proposed January 01, 2018 VAT implementation date. Some UAE vendors say they require more time to get familiar with the new system or to update the financial system. 

VAT will be applied on goods and services at every stage of supply chain and eventually its burden will be borne by the consumer. If VAT is not applied correctly it might become an additional cost for the business. Moreover, late payment of VAT and VAT return raise severe penalties. All companies have to reassess their long-term contracts to decide if VAT has been accurately addressed.

It’s declared by the authority that basic food items will be excluded from VAT and it’s anticipated that VAT will generate 1.5 percent of the UAE’ gross domestic product. According to NBAD senior economist UAE economy expected to grow to $440 billion in 2019, the VAT part would be approximate $6.5 billion. He also added one must not underestimate the complexity of new tax implementation which has never been implemented in GCC region.