UAE says no plan to hike VAT

The UAE’s Ministry of Finance on Tuesday said it raised Dh11.6 billion in value-added tax (VAT) revenues in the first eight months of 2020 and the government has no plans to raise VAT to more than five per cent.

Excise tax revenues increased 47 per cent year-on-year to Dh1.9 billion during January-August 2020 period, the ministry said.

Saeed Rashid Al Yateem, assistant under-secretary of resource and budget at Ministry of Finiance, said 30 per cent of VAT revenues will be distributed to the federal government and 70 per cent to local government.

While the federal government's share of excise tax revenues on tobacco products stood at 45 per cent and 55 for local governments. The federal government's share of the excise tax revenues on other excise goods such as energy drinks, soft drinks as well as beverages sweetened with added sugar is 30 per cent.

Al Yateem said tax revenues help implement development projects in accordance with the UAE government’s plans and mitigate impact of the Covid-19 pandemic.

“Therefore, MoF continues to follow up on tax policies in coordination with the Federal Tax Authority (FTA) to ensure they’re in line with developments in the regional and international arena and that legislations are continuously updated in accordance with financial policy objectives and sustainable economic growth,” he added.

He affirmed that there are no plans or decisions at the moment to raise VAT to more than five per cent in the UAE.

The tax revenues generated in 2019 amounted to about Dh31 billion, compared to almost Dh29 billion in 2018. The growth rate of total tax revenues in 2019 increased by about seven per cent in comparison to 2018.

The UAE began applying VAT on January 1, 2018, at a basic rate of five per cent on most goods and services levied at each point of sale.