UAE residents take VAT in their stride

Dubai - While consumers will probably be more conscious of their spending habits, and think twice about non-necessary expenditure

The 12-hour flash sale on December 26 - right before the onset of the 23rd edition of the annual Dubai Shopping Festival - holds a special significance this time. It'll be one of the last occasions during which you can splurge, VAT-free. "Yes, we are expecting bumper sales," a top retail head points out, "because everyone's going to stock up."

VAT kicks in on January 1, and housewife Nisha Multani, who lives in the Mankhool area, says she will now follow a "process" whereby "impulse purchases" will be curtailed as much as possible, and weekly shopping at stores such as Carrefour and Lulu - where special deals rule the roost ("like buy one, get one free") - will become the new order. Nisha mentions there are members in her extended family who are planning on getting stuff like oil and cosmetics from their frequent India trips. "And also duty-free shopping will witness a definite spike," she laughs.

Mansoor Sarwar, technical services and pre-sales director for Sage Middle East, has a list of tips to offer those seeking to somewhat alter their lifestyle in the wake of VAT. "If you want to buy an expensive car, watch or jewellery, it is a good time to buy it now and save on the 5 per cent," he points out. "Additionally, residents should plan their finances better in terms of budgeting, such as planning cash inflows and outflows. Do not give in to impulsive buying that can have a snowball effect." Finally, "residents should not panic and take the changes in their stride, as the larger expenses like house rent, education and healthcare are all tax-exempt."

While consumers will probably be more conscious of their spending habits, and think twice about non-necessary expenditure like jewellery, expensive gadgets or entertainment, there's another side to the coin. Claude Al Hachache, co-owner and creative director of Carla K Styling salon on Sheikh Zayed Road, says VAT in the UAE is "much lesser than taxes in most countries expats hail from. So, I do foresee a slicing down of maybe big-ticket expenditures at the outset, but then it's going to get back to square one." Speaking for her sector, "People cannot not get their hair cut!"

Sidharth Kalia, a banker, feels that the VAT effect will flatten out after a couple of months. "People will be more circumspect when it comes to spending initially, but then they will get used to it - just the way they got used to Salik."

The good news is, two of the biggest expenses for most residents are house rents and education - which are VAT-exempt. "We are telling residents to look at the bigger picture. The UAE government is definitely going to reinvest most of the extra revenue from VAT back into the country, whether it is developing infrastructure or building a more diversified economy. These investments will mean more opportunities and job creation," signs off Sarwar. - sushmita@khaleejtimes.com

(How you choose to "tweak" your lifestyle ultimately depends on you. Read today's WKND - the feature titled 'Hoping for a new you?' - to gain further insights.)

• Dubai