HOW IMPACTFUL HAS VAT BEEN IN UAE
Whenever in any part of the word, new taxes are implemented, there is a reaction initially but as time passes by, the people start accepting it . Same has been the case in UAE in reference to the VAT that was introduced on 1st January, 2018 and since then in order to make the customers more confident, the retailers have started taking VAT in their account.
VAT’s impact in the UAE has been positive as well as negative and has been listed below .
IMPACT OF VAT
Since implementation of VAT, the sale of jewellery has been declined and as a result of which Federation of GCC Chambers of Commerce and Industry have called for a review of 5% VAT on jewellery. The gold retailers are calling for either exemption from the VAT or leviability of tax on the making charges in order to reduce the cost of the product.
The impact of the proposal is expected to be on a positive side that is aimed to bring a momentum in the jewellery industry. This would also encourage the customers to come forward in order to meet their gold jewellery needs and would also lead in re establishing UAE as a preferred jewellery destination.
FOOD AND BEVERAGES
The spending on food and beverages have not been reduced by the UAE residents even after VAT’s implementation. This is because most of the major retailers have absorbed VAT as a part of their marketing strategy in order to woo the customers while some of have passed VAT onto the consumers in those cases where the retailers could not manage VAT.
VAT has not been successful in impacting the purchasing power of the customers since VAT is applied on most of the items that are being purchased on daily basis such as food, clothing and personal care . Whereas , the so called additional spend made up of financial services, education and flights that are non taxable. VAT’s effect has however not been the same for everyone since different individuals and households have different spending patterns.
VAT’s implementation has resulted in rising of inflation to 3.3% and the higher oil prices have trickled down to make the goods and services dearer. Furthermore, the transportation prices have arisen by 10% provided that the fuel practices have been deregulated since 2015. This implementation would as a result of higher oil prices would support domestic demand that would put upward pressure on inflation.