The UAE will not increase value-added tax (VAT) which is currently levied at five per cent, the Ministry of Finance said on Monday.
Al Arabiya TV also reported that the UAE has no plans to increase VAT.
In a surprise move on Monday, Saudi Arabia increased VAT threefold to 15 per cent and also suspended the cost of living allowance to increase revenues. “Cost of living allowance will be suspended as of June 1, and VAT will be increased to 15 per cent from 5 per cent as of July 1,” the Kingdom’s state news agency said on Monday.
Analysts told that increasing VAT will hurt the UAE’s non-oil sectors and also dampen consumer confidence.
Khatija Haque, head of Mena Research at Emirates NBD, said in a note earlier that the UAE’s budget commitments are not as large as Saudi Arabia’s with total spending in 2019 of Dh430 billion, around 40 per cent of Saudi Arabia’s budget last year.
“While we do expect the UAE’s budget deficit to register a significant deficit of around 10 per cent of GDP in 2020, this follows two years of budget surpluses. Raising VAT in the UAE at a time when consumers are already struggling with layoffs and pay cuts and businesses have seen demand contract severely would be counterproductive. It would not raise non-oil revenue significantly and further weigh on already weak aggregate demand,” she said.
