Ride-hailing apps Uber and Careem are upping their prices in the UAE, attributing the inflation to the introduction of VAT.
However, the increases will only amount to a small fraction of the total fare cost.
While transport is exempt from VAT, the tax does apply to "marketplace services", Uber said in a blog post announcing the new fare charges. The increase would amount to 1.7 per cent of the total trip cost.
"To reflect these recent changes, Uber trip fares will increase slightly for all ride options, including uberX, UberSELECT, UberBLACK, UberXL, UberONE and UberVIP in the rides app. In the coming days, you will see these updates reflected in your trip fares," it said.
This would also allow drivers to "earn a little more" to make up for the earnings lost through additional taxes.
Careem will also be increasing their fares for the same reason.
Much of the technology used by Careem is subject to VAT, so the company will be charging a tax component on the proportion of the fare which represented their technology cost or profit margin.
"Even though transportation is exempt from VAT, Careem’s electronic marketplace service is not, therefore your ride with Careem will be taxed only on the portion of the fare that is attributable to our marketplace service," Careem UAE general manager Clemence Dutertre said.
"This will translate into an average fare increase of 1 per cent."