Gulf countries began taking initiatives in 2015 to boost non-oil revenue by liberalising the way fuel prices are set and planning new levies on other goods such as sugary soft drinks. Andrew Henderson / The National
Gulf countries began taking initiatives in 2015 to boost non-oil revenue by liberalising the way fuel prices are set and planning new levies on other goods such as sugary soft drinks. Andrew HendersonShow more

VAT to generate Dh20 billion in second year for UAE, Minister of Economy says



The UAE, which plans to introduce value added tax (VAT) next year alongside the other five GCC countries, could generate up to Dh20 billion in revenue from the levy in its second year of implementation, according to the Minister of Economy.

"VAT is expected to yield Dh12bn in the first year of its implementation and up to Dh20bn during the second year," Sultan Al Mansouri said in an emailed response to questions from The National.

Gulf countries are planning to generate non-oil income from new sources such as VAT to help deal with the low oil price era.

They began taking initiatives in 2015 to boost non-oil revenue by liberalising the way fuel prices are set, and raising electricity and water tariffs. Higher taxes on tobacco and new levies on other goods such as sugary soft drinks are also planned.

According to professional services company PricewaterhouseCoopers, the introduction of VAT will help governments in the region “deliver on long-standing plans for economic diversification away from oil, while still being able to deliver social and economic programmes”.

The UAE Cabinet last year approved a Dh248bn federal budget for the next five years, with a prime focus on education, social development and health, as the country bucks the regional purse-tightening trend. For 2017, expenditure is projected at Dh48.7bn, leaving a negligible deficit.

“Reducing dependence on oil revenues, finding other sources of income, rationalising current spending and enhancing investments in strategic sectors and projects are predicted to bring further growth for the non-oil sectors, which are forecast to reach 4.6 per cent by 2020,” the minister said. The proposed GCC-wide VAT is expected to be set at 5 per cent and include various exemptions for food and basic items.

The IMF has argued that introducing VAT at a low rate could generate 1.5 to 2 per cent more GDP for the Gulf states.

The fund said in October 2015 that the Gulf states would have a combined fiscal deficit of between 2015 and 2019 that would exceed US$700bn if they did not undertake reforms.

Since then, several countries have cut energy subsidies, trimmed spending and talked about taxes and privatisation to shore up government revenue.

More than two-thirds of senior business figures in the UAE believe reforms such as cutting fuel subsidies and the introduction of duties such as VAT are necessary to boost development in the region.

Research conducted exclusively for The National by Borderless Access found that 69 per cent of respondents in the UAE and 66 per cent in Saudi Arabia felt that subsidy cuts and the introduction of VAT would help regional development.

Mathias Angonin, lead analyst for the UAE at Moody’s, said the ratings agency views both moves as “credit positive”. It has estimated that the UAE’s removal of fuel subsidies added 0.7 per cent of GDP to fiscal revenue.

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UAE currency: the story behind the money in your pockets
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Position: legal consultant with Al Rowaad Advocates and Legal Consultants.

FORSPOKEN

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Publisher: Square Enix
Console: PC, PS5
Release date: January

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Publisher: SEGA
Console: PC, PS5, XSX
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Publisher: Electronic Arts
Console: PC, PS5, XSX
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Publisher: Warner Bros
Console: PC, PS5, XSX
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Release date: June

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Publisher: Capcom
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Publisher: Ubisoft
Console: PC, PS5, XSX, Amazon Luna
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Publisher: Bethesda Softworks
Console: PC, Xbox
Release date: 2023

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Price: From Dh167,500 ($45,000)
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Rating: 2/5

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2000: Amazon Marketplace opens, allowing people to sell items on the website

2002: Amazon forms what would become Amazon Web Services, opening the Amazon.com platform to all developers. The cloud unit would follow in 2006

2003: Amazon turns in an annual profit of $75 million, the first time it ended a year in the black

2005: Amazon Prime is introduced, its first-ever subscription service that offered US customers free two-day shipping for $79 a year

2006: Amazon Unbox is unveiled, the company's video service that would later morph into Amazon Instant Video and, ultimately, Amazon Video

2007: Amazon's first hardware product, the Kindle e-reader, is introduced; the Fire TV and Fire Phone would come in 2014. Grocery service Amazon Fresh is also started

2009: Amazon introduces Amazon Basics, its in-house label for a variety of products

2010: The foundations for Amazon Studios were laid. Its first original streaming content debuted in 2013

2011: The Amazon Appstore for Google's Android is launched. It is still unavailable on Apple's iOS

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The flights

Fly direct to London from the UAE with Etihad, Emirates, British Airways or Virgin Atlantic from about Dh2,500 return including taxes. 

The hotel

Rooms at the convenient and art-conscious Andaz London Liverpool Street cost from £167 (Dh800) per night including taxes.

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The Shoreditch Street Art Tour costs from £15 (Dh73) per person for approximately three hours. 

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2. Schedule a time to use social media instead of consistently throughout the day. I recommend setting aside certain times of the day or week when you upload pictures or share information. 

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Price, base: Dh141,740 (three-door) / Dh165,900 (five-door)
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Edinburgh: November 4 (unchanged)

Bahrain: November 15 (from September 15); second daily service from January 1

Kuwait: November 15 (from September 16)

Mumbai: January 1 (from October 27)

Ahmedabad: January 1 (from October 27)

Colombo: January 2 (from January 1)

Muscat: March 1 (from December 1)

Lyon: March 1 (from December 1)

Bologna: March 1 (from December 1)

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Rupert Harrison, a fund manager at BlackRock, sees the risk of it falling to trade level with the dollar on a no-deal Brexit. The view echoes Morgan Stanley’s recent forecast that the currency can plunge toward $1 (Dh3.67) on such an outcome. That isn’t the majority view yet – a Bloomberg survey this month estimated the pound will slide to $1.10 should the UK exit the bloc without an agreement.

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The pound fell 0.8 per cent to $1.2033 on Friday, its weakest closing level since the 1980s, after a report on the second quarter showed the UK economy shrank for the first time in six years. The data means it is likely the Bank of England will cut interest rates, according to Mizuho Bank.

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Bloomberg

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Current staff: more than 160 employees
Stage: series D 
Investors: EightRoads Ventures, Square Peg Capital, Sequoia Capital India

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