VAT in UAE: Shopkeepers hold out for small change

Retailers willing to absorb extra charges for the sake of customer satisfaction

A store cashier receives payment from a customer on Tuesday, Nov. 8, 2011, at a local convenience store in Abu Dhabi. (Silvia Razgova/The National)
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Shopkeepers say they are willing to absorb small extra charges caused by VAT in the interests of keeping customers happy.

Despite assurances from the UAE Central Bank’s that coins of various denominations are in circulation, managers say they do not hold or have not recently been issued with anything lower than 25 fils coins.

“It is a problem with us,” said Dr Inas Mesbah, who runs a pharmacy in Al Nahyan.

“If it is 14 fils, we take 25. Most customers accept it. Sometimes a customer will ask why, but what can we do?”

At a supermarket on Reem Island, manager Wadih Ghrayed said coins are usually delivered once or twice a week but that the store was short of one, five and 10 fils coins, as the supply had not yet been replenished this week.

“It’s according to the bank, if they can provide them,” said Mr Ghrayed. “If we have them, we will give them. If not, we will say sorry to the customer, and we will round up to 25 fils.”

While most customers are understanding when small change isn’t available, some are rightly irritated, he said.

“I heard some complaints and, in the end, it is the right of the customer to take his five, 10 fils, or whatever,” said Mr Ghrayed.

“But then, it’s not from our side, because the banks are not providing change.”

The Department of Economic Development previously announced that VAT affected prices that now add up to small amounts of change could in Abu Dhabi be rounded up by 25 fils for simplification, but it overturned its announcement on Saturday.

The recent change in policy was in response to complaints filed by consumers who claimed that they were being grossly overcharged.

Khalifa Al Mansouri, the undersecretary of the economic development department, said it was keen “to prevent any violations in this matter or the exploitation of the implementation of the value added tax or compromising the consumers’ rights by raising the prices or taking advantage of the collection of illegal amounts of any value whatsoever”.

An inspection team sent by the department will continue to visit shops across the emirate to “ensure that the tax collection mechanism is properly implemented”.

Any shop that fails to issue the correct change will be fined, the department said.

“The department will issue tickets against any shops that refrain from giving the consumer the remaining fils as a result of collecting the tax, and the consumer has a right to receive the remaining amounts after paying the value of the service or commodity of any kind,” the department said.

All shop employees who spoke to The National on Sunday said they had not received any official communications outlining the development department's new decision on fils.

The retailers said that since they didn’t carry any one, five or 10 fils coins, they would have to round up to 25 fils, as they had been doing anyway.

At one Baqala, items costing one, two, three or four dirhams were not officially taxed, according to the cashier, because consumers usually didn’t carry the extra 5, 10, 15 or 20 fils needed to pay the difference and the owner didn’t want to make them round up.

The same was true at a small, independent grocery store in Al Nahyan.

A cashier there said water bottles technically cost Dh1.05 with VAT, but customers would only have to pay the pre-VAT price of Dh1 to avoid problems with coins.

For many shoppers, the issue of coins can be easily resolved with a credit or debit card.

“Normally, when I shop I pay by card because sometimes it’s difficult to get the change because they cannot produce the exact amount,” said Vaqar Jadoon.