How will “VAT – VALUE ADDED TAX” effect the UAE – Economy and Employment

VAT is scheduled to come into effect from January 1, 2018.

 

What is VAT?

 

Value Added Tax (in short VAT) is an indirect / consumption tax on the supply of the goods and services

–              Implemented in more than 150 countries across the globe

–              All 29 EU member states have implemented

–              Including countries like Canada, New Zealand, Australia, Singapore and Malaysia

 

Why in UAE?

 

In UAE high-quality public services are provided to its citizens and residents at a cheaper / much lower price

–              To bring-in alternate revenue sources which will help them reduce dependency on Oil

–              VAT will be a new source of income / revenue in UAE

 

What would be the impact in UAE?

 

“VAT is expected to yield Dhs12 billion in the first year of its implementation and up to Dhs20 billion during the second year,”

– Sultan Al Mansouri, Minister of economy.

(Reference – The National)

 

Flowers:

 

–              VAT, a new source of income

–              A contribution to the quality of the public services even in future

–              It will also help the government to take a step forward towards its vision of reducing dependency on oil and other hydrocarbons

–              Creating a more stable economy

–              Even at a low rate, VAT has the potential to raise huge amounts of revenue.

–              As UAE is one of the most globally ambitious countries, with trillions of dirhams of infrastructure projects scheduled in the next ten to 25 years, creation of a stable revenue stream is good practice by the government.

(Source: www.timeoutdubai.com)

–              Education and Healthcare are Zero-rated

–              Two terms to remember

o             Exempt (VAT has to be paid, can’t apply for refund)

o             Zero-rated (VAT is not applicable or can be refunded)

 

Thorns:

 

–              Cost may go up by 5% which is minimal and affordable

–              UAE being one of the costliest countries in the world, 5% additional would raise questions

–              94 food products are exempted

 

What is the Conclusion?

 

But set at five percent, the new levy seems a small figure when compared to the 150 countries already implementing VAT or a similar method of taxation (in the UK, for example, VAT is 20 percent).

Yes, we might see a general rise in our cost of living, but with the GCC members having already agreed to exempt 94 food products, as well as school fees and healthcare bills, from the new taxation, so there is no need to panic.

 

What will be the immediate effect on recruitment, hiring patterns and job creation?

 

There’s likely to be a mini consumer boom before the end of 2017 and also an upsurge in vacations and hotel room bookings before VAT sets in, there could be an increase in hiring in the retail and hospitality sectors to cope up with the consumer spike.

 

The demand for accounting, finance and tax executives, as well as information technology (IT) professionals is only expected to grow as the VAT rollout draws closer. Any company that procures or sells products and services in the UAE will now have to beef up preparations for the collection of VAT, upgrade their processes and look at the different aspects of their business, from the supply chain all the way to the end customer.

 

Considering that several organizations will be on the lookout for talented professionals for their VAT implementation, there will be a shortage in IT implementers to do the ERP transformations and more critically, a major shortage in suitable skilled staff with knowledge of VAT and the requirements to implement VAT across the business processes

 

It’s safe to say that thousands will be recruited. However, a lot of professionals without relevant experience will lose their jobs because they are not qualified or experienced in the area.

 

A recent survey by a leading talent search organization has found that larger organizations with a higher headcount are better prepared for VAT implementation, as compared with smaller organizations. This survey also reports that many companies have not assigned a budget for VAT implementation and therefore could be implementing VAT without increasing headcount spend and introducing the new laws using their existing workforce.

 

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