It also rated the Emirates as the least corrupt society in the Arab world, granting it 62 points in its Freedom from Corruption category.
Although the UAE got a medium rating in the overall index, ranked 63rd among the 162 countries covered by the index, it was on top of the list in some of the 10 sub categories included in the Index, which was created by the Washington-based Heritage Foundation and the Wall Street Journal in 1995.
Only Kuwait was on a par with the UAE in fiscal freedom as it got an equivalent rating, while Qatar received 99.8 points. The index gave 99.7 points each to Saudi Arabia and Bahrain and 98.5 points to Oman.
Other Arab countries received lower points as many of them impose heavy taxes given their relatively low oil resources.They included 65.4 points for Morocco, 83.2 points for Yemen, 74.8 points for Jordan and 77.0 points for Algeria and 86.2 points for Syria.
Egypt and Lebanon received relatively high points as they have cut taxes within financial liberalisation and economic reforms aimed at attracting investment.Lebanon received 91.4 points and Egypt 90.8 points, while Libya got 81.7 points although it is an oil producer.
In its definition of the Fiscal Freedom category, Heritage said it is a “measure of the burden of government from the revenue side”.
“It includes both the tax burden in terms of the top tax rate on income [individual and corporate separately] and the overall amount of tax revenue as a portion of gross domestic product (GDP),” it said.
The UAE does not have income or corporate taxes but imposes
indirect token taxes, including fees on government services, on firms and individuals.Economists see no change in such a policy on the ground that the UAE is enjoying massive fiscal surpluses because of high oil prices.
“Even during the height of the oil price crisis in late 1980s and 1990s, the UAE ruled out the imposition of income taxes although it was suffering from persistent budget deficits,” an economist at an Abu Dhabi-based bank said.
“I do not think the UAE now needs to impose taxes when oil prices are nearly $100 and the country controls one of the largest foreign assets in the world.”
Qatar, which has the highest per capita income in the region, received 60 points by Heritage in the least corrupt society in the Arab world category, while 57 points were given to Bahrain and 54 points to Oman.
Kuwait got only 48 points, while Saudi Arabia was rated as having a relatively corrupt system, with only 33 points.The UAE also got a good rating in the Trade Freedom category, obtaining 80.4 points, third only to Kuwait and Bahrain in the Arab region.
It also had one of the best monetary and labour systems but lagged behind in such categories as investment and property freedom.
UAE rated best tax-free system in the world