The level of value-added tax (VAT) to be imposed in the UAE has yet to be set – but it will be less that the current five per cent levied as an import tax, Emirates Business has learned.
Abdulrahman Saleh Al Saleh, Director of Commercial Affairs at Dubai Customs, said final discussions on the tax had yet to be completed, but it would be imposed at between three and four per cent.
In a statement to Emirates Business, Al Saleh said the government had not finalised a date to introduce VAT, and he denied previous reports of a 2010 deadline.
"The date of VAT's application has not been set by the Ministry of Finance which conducts a study of VAT. Dubai Customs participated in the discussions and studies carried out by the Ministry. We think VAT will be a source of power for the UAE economy." Al Saleh said.
He stressed the federal government was working with international bodies, especially the International Monetary Fund, to study positive and negative effects of VAT on the UAE's economy.
Al Saleh said there were more positive aspects of VAT than negative. If it is applied as the alternative to customs duties, it will not raise the rate of inflation in the UAE, he said.
"Local and foreign studies conducted by the government confirmed the VAT's positives and there is no reason for fear," he said.
On Monday, the Federal Customs Authority issued a statement that VAT will not be introduced until 2010 as technical studies were incomplete.
Meanwhile, the Gulf Co-operation Council plans to end its system of charging import duty for the country of final destination and may replace it with a simpler mechanism, a UAE official said.
The new system will be in place and all issues concerning a GCC customs union will be completed by the end of this year, Saeed Khalifa Saeed Al Marri, deputy director-general of the UAE's federal customs authority, said in an interview in Abu Dhabi.
"It took some time to understand the concept of customs union for both governments and traders," said Al Marri. "There has been huge progress. We are using the same tariff, and we are using the same point of entry for everyone."
The customs union stipulates that goods coming into the GCC are charged at a consistent tariff of five per cent and can move around freely among the six member states. Currently, import duty is collected at the port of entry and is forwarded to the country of final destination.