ABU DHABI // Despite the long list of breaches to budget rules presented to the FNC on Tuesday, members said many problems had been resolved since last year.
"There were improvements in the number of violations and the way it was presented," said Ali Al Nuaimi (Ajman) yesterday. "Credit goes to the Ministry of Finance."
Mr Al Nuaimi said at this rate he was optimistic next year's report would show even fewer instances of government misspending.
Most of the problems were carried over from previous years, including that of the Ministry of Interior collecting fees for residency and naturalisation services through a private company, in contravention of the regulations.
It also failed to pass revenue from traffic fines, except those in Abu Dhabi, to the federal Government.
The Ministry of Foreign Affairs has still not bought embassies and accommodation for diplomats, for which funds had been allocated years before.
Other ministries, including Labour, Culture, Youth and Community Development, Public Works, and Defence had also failed to correct problems from previous years.
In some instances, the committee asked ministry officials to join their closed meetings to explain discrepancies.
While most sought to justify their practices, others said they were trying to correct problems.
When the Ministry of Justice was asked why court revenues were not being fed directly to the federal budget, officials said the issue was being resolved through the inspections department, which was considering a decree on the matter.
The ministry was also taken to task over revenues from the Umm Al Quwain federal court that were not being passed to federal coffers.
The ministry accepted this, and said the matter had been raised to higher authorities in the emirate.
The Justice Ministry said a lack of Emirati staff stopped it monitoring revenues internally and asked for additional funds for this.
Ministry of Interior officials said they were working to synchronise fines and fees across the country. When that happened, all revenues would go into public coffers.
A Cabinet decision last year resolved a previous problem with Civil Defence organisation, they said, and a decision was expected soon to combine fees for residency and naturalisation, and traffic fines.
The officials said because most police staff worked at the local level, their salaries come from local government. That could soon change, with police to be paid federally.
That would also require the various local forces to put their revenue from fines into federal funds, which would go some way to answering a long-time demand for emirates other than Dubai and Abu Dhabi to contribute to the budget.
The Ministry of Public Works admitted some of its debtors may never pay and asked for the amounts owing to be written off as bad debts.
Correcting all the problems is bound to take time. The report considered on Tuesday was for the end of 2011 - meaning issues addressed now will remain in the 2012 report, likely to be considered next year.
"No doubt we have to give credit to the Government," said Mohammed Al Raqbani (Fujairah). "This year the report is better than last year, and the next will be better."
Members passed the report and its bill on the condition that the breaches be addressed.
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About Housecall
Date started: July 2020
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Ten tax points to be aware of in 2026
1. Domestic VAT refund amendments: request your refund within five years
If a business does not apply for the refund on time, they lose their credit.
2. E-invoicing in the UAE
Businesses should continue preparing for the implementation of e-invoicing in the UAE, with 2026 a preparation and transition period ahead of phased mandatory adoption.
3. More tax audits
Tax authorities are increasingly using data already available across multiple filings to identify audit risks.
4. More beneficial VAT and excise tax penalty regime
Tax disputes are expected to become more frequent and more structured, with clearer administrative objection and appeal processes. The UAE has adopted a new penalty regime for VAT and excise disputes, which now mirrors the penalty regime for corporate tax.
5. Greater emphasis on statutory audit
There is a greater need for the accuracy of financial statements. The International Financial Reporting Standards standards need to be strictly adhered to and, as a result, the quality of the audits will need to increase.
6. Further transfer pricing enforcement
Transfer pricing enforcement, which refers to the practice of establishing prices for internal transactions between related entities, is expected to broaden in scope. The UAE will shortly open the possibility to negotiate advance pricing agreements, or essentially rulings for transfer pricing purposes.
7. Limited time periods for audits
Recent amendments also introduce a default five-year limitation period for tax audits and assessments, subject to specific statutory exceptions. While the standard audit and assessment period is five years, this may be extended to up to 15 years in cases involving fraud or tax evasion.
8. Pillar 2 implementation
Many multinational groups will begin to feel the practical effect of the Domestic Minimum Top-Up Tax (DMTT), the UAE's implementation of the OECD’s global minimum tax under Pillar 2. While the rules apply for financial years starting on or after January 1, 2025, it is 2026 that marks the transition to an operational phase.
9. Reduced compliance obligations for imported goods and services
Businesses that apply the reverse-charge mechanism for VAT purposes in the UAE may benefit from reduced compliance obligations.
10. Substance and CbC reporting focus
Tax authorities are expected to continue strengthening the enforcement of economic substance and Country-by-Country (CbC) reporting frameworks. In the UAE, these regimes are increasingly being used as risk-assessment tools, providing tax authorities with a comprehensive view of multinational groups’ global footprints and enabling them to assess whether profits are aligned with real economic activity.
Contributed by Thomas Vanhee and Hend Rashwan, Aurifer
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