Residents think before spending after VAT imposed in UAE

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Before VAT, getting a new smart TV or a new mobile phone every year would have been easy.- Alamy Image
Before VAT, getting a new smart TV or a new mobile phone every year would have been easy.- Alamy Image

Many people Khaleej Times spoke to are now thinking twice about making a new purchase as they try to stick to their budgets.

By Rohma Sadaqat

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Published: Fri 12 Jan 2018, 9:52 PM

A little thought and some calculation could go a long way when it comes to getting more out of your hard-earned money. This could mean dropping  extra sides to your favourite dish, or skipping dessert to save  for a movie. Residents are stopping, thinking and calculating before spending in the VAT era.

They say they are okay giving up life's little luxuries these days, and admit the 5 per cent tax has affected their spending habits - from dining out to grocery shopping. Many people Khaleej Times spoke to are now thinking twice about making a new purchase as they try to stick to their budgets.
"The implementation of VAT has impacted my buying behaviour quite a bit in terms of prioritising my needs over my wants, knowing that each purchase will now have an additional cost," says Marjorie Jaspe, a customer service agent.
"I got some electronics recently and it's funny how I regret not buying them before 2018 when I wouldn't have paid Dh180 extra. I mean five per cent shouldn't be a big deal, but somehow it makes me a little bit more mindful about my spending today."
Naveen Sharma, chairman of the Institute of Chartered Accountants of India - UAE (Dubai Chapter), explains that for many residents like Jaspe, the situation called for placing their immediate needs over their wants. "It's all a mindset when it to comes to many shoppers, because the tax itself is not very high. However, many people who are making big purchases like electronics are now going to be very careful."
Before VAT, getting a new smart TV or a new mobile phone every year would have been easy. Not anymore. Many people are going to make their electronic gadgets last longer before they decide to upgrade and buy new ones, he says.
Yusuf Stapic, a Dubai resident, says he felt the change from January 1. "Everything I bought from the grocery had an additional, small cost and, on average, I realised that I spent about Dh10 more every day. I noticed a significant hike at restaurants and entertainment zones."
Stapic says he hasn't purchased anything expensive like a mobile phone, TV, or branded clothes so far this year. He's doing the math more. "My biggest concern now revolves around getting involved in banking, real estate, and a car purchase, since the VAT addition will be significantly higher.
Emmanuel Israel is another Dubai resident who says that the new tax has forced him to make changes. "I have reduced my eating out from twice a week to once a week due to the tax on entertainment," he says. He tries to purchase food products from markets rather than groceries. "I would also stop the cinema visits and TV packages, and utilise Netflix instead. Utilities are among the largest expenses here in the UAE, so this means that I have to find ways to cut down on using data on my phone, and I would also have to find new ways of saving water and electricity."
Omar Benseddik, however, says VAT will not impact his lifestyle, though he will think twice before spending things he does not need. "For instance, if I go to a restaurant and have a meal for about Dh60, I will probably avoid having a juice on the side, given that the original prices are already high. I would go for water instead."
Anurag Chaturvedi, senior director at Crowe Horwath, says that a yearly average spend on groceries, utilities, and entertainment for a family of two is estimated at D30,000. This will go up by Dh1,500 per year due to the VAT. He says that there is no need to panic about the tax, as the FTA has kept education, healthcare, and residential property rental zero-rated.
"Other expenses are charged at five per cent, which is the lowest amongst countries that have implemented VAT," he says. "There are steps that you can take to reduce the impact of the tax such as planning your spending and distributing the period to shift the impact of the VAT; identifying options to increase cashbacks on your spend such as bank offers; and exploring e-commerce options to avail reduced prices and VAT."

Be a picky shopper

1-Plan your spending well in advance; it always pays to have a plan and set a budget for the month
2-Prioritise your needs over your wants; if something can be used for longer, then there is no sense in changing it
3-Identify options to increase cash-backs on your spend through bank offers
4-Explore e-commerce options. You might get better deals online
5-Research when shopping for a product; different stores often have different pricing schemes

Bills to pay

>Expenses for four-person family per month Dh11,614.27 (excluding rent)
>Expense for a single person/month Dh3,341.02 (excluding rent)
rohma@khaleejtimes.com



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