My research on VAT (Value Added Tax) in UAE and its implementation study for Business Taxation Course

I did some research for the project of Business Taxation Course and I would like to share my own summary of the topic which is the VAT (Value Added Tax) in UAE and its implementation study.

Definition of VAT:

VAT is a tax on consumption rather than production and is calculated on the stages of production of a commodity or service to avoid repetition. Also it is a neutral tax, which is imposed not on the value of products at their final price, but on the value added at each stage of production.

United Arab Emirates vat / sales tax  and the study of its implementation ,the Indirect Sales tax:

There are no consumption taxes or VAT (Value Added Tax) in the UAE, but individual Emirates may charge levies on certain products such as liquor and cigarettes and on certain services such as those provided in the hospitality industry and this considered as indirect sales tax.Value added tax has slowly entry and implement on developing countries, and now is about to hit the GCC. Thus, the people feel worry for reaching and implementing VAT in the country,  especially in Dubai given the increasing cost of living that has suffered the emirate in recent years from these increasing.  So it is time to look the reality that a tax should be implemented and the VAT will be implementing within the coming two to three years so there is currently no sales tax and there is delay on the implementation of VAT Law in the UAE until mid-2013.  However, a last decision has to be taken through the federal authorities and recommended by the International Monetary Fund (IMF) and the UAE consider implementing such a system of VAT. This will be an essential decision for the country’s leader.  Therefore, the UAE has been studying to implement VAT about more than two years it must be well advanced in preparations to implement the VAT law. The UAE has to study the current economic conditions, the global downturn, falling oil prices and the advancing US dollar must support early implantation as inflationary pressures are decreasing.  Furthermore, a stable and diverse revenue source will assist public investment and expenditure essential for economic diversification. Thus, those activities will support to introduce VAT in the UAE.