Shoppers play catch-up before VAT

Dubai - UAE retail sales spike before new year as customers avoid new tax

Retail sales surged in the last few days before the new year, as shoppers across the UAE sought to make the most of the discounts being offered at various shopping malls before the implementation of the value added tax (VAT).
Experts observed a sharp rise in visitor numbers at malls and shopping centres in the last week before the new year, with shoppers mainly interested in purchasing items such as electronics, jewellery, and apparel. Shopping sentiments were also influenced by the Dubai Shopping Festival (DSF), which began on December 26, 2017, and will run until January 28, 2018. With retailers promising discounts and bargain offers ranging from 50 per cent to 90 per cent, even the most reluctant shoppers were tempted into visiting different shopping destinations.
Naveen Sharma, chairman of the Institute of Chartered Accountants of India - UAE (Dubai) Chapter, explained that many residents, especially those that are new to the tax, took the last few days before the new year to stock up on items that would have cost them more after January 1, 2018.
"VAT is a consumption tax, so anything that you consume will be taxed. Many shoppers went to malls to buy items that they know will be taxed in the future, such as electronics. This is a case of them making decisions right now, rather than postponing them for the future, in order to avoid paying extra as tax."
Sharma further explained that many residents opted to think further ahead and even buy items for special occasions such as jewellery and watches for wedding anniversaries. "We have also had cases of people making large electronic purchases such as smart TVs and smart phones. In addition, we even witnessed cases of people opting to buy cars for themselves before the new year's deadline so that they remain in their budgets."
Anurag Chaturvedi, senior director at Crowe Horwath, echoed Sharma's observations. "One shopper bought over 5kg of gold due to the VAT, and many electronics and grocery shoppers bought double their usual stock for consumption."
Pre-VAT shopping also spelled a good month for retailers, with many reporting a surge in sales.
"We witnessed an exponential surge in sales across all segments in the last few days ahead of the VAT implementation as customers rushed to malls to make their purchases. Electronic gadgets in particular were in high demand, and we saw an increase of over 40 per cent in the last week of December, with sell-outs across all categories, particularly in smartphones, laptops, TVs and new gadgets," said Nadeem Khanzadah, head of omni-channel retail at Jumbo.
"We have had a hugely successful month of December at Dubai Festival City Mall, where we have experienced year-on-year growth," said Steven Cleaver, director of shopping malls at Al-Futtaim Group Real Estate.
"We can attribute this success to a number of activities and promotions that we have hosted... the Dubai Shopping Festival has just kicked off five weeks of great sales and with more new customer experiences in store, we are looking forward to a positive 2018," he said.
Adrian Lee, head of leasing at Wafi, also noted that Wafi has enjoyed a remarkably positive increase in footfall through the month of December, following on from a progressive growth through from September 2017.
"This is attributed to the annual Christmas activity...there was no spike in footfall, attributable to the introduction of VAT and there is no evidence of consumer confidence being affected during this period."
- rohma@khaleejtimes.com