to tax or not to tax?

If people are honest, and by people I mean myself as I cannot speak for anyone else, they would admit that the main draw card for living in this region is the fact that it’s tax-free. Now of course there are those that will tell you that whilst it may be tax-free there are so many hidden costs, and fees for EVERYTHING, that when living here it can sometimes feel like you ARE paying a kind of tax. I am not sure that I agree with that, well not entirely anyway. Perhaps if you are coming from Europe or the US it may seem this way, but for me, coming from Africa, that part (the paying a fee for everything part) is normal. In South Africa, not only is there a fee for everything, and double it if you want something quickly, but you also pay hefty amounts in tax; both personal and VAT, as well as capital gains tax, estate duty, transfer duty, etc, etc, ad nauseum. For us, then, the fact that the UAE is still a tax-free place was a big plus when making our decision to come here.

It seems the idea of VAT has been discussed and delayed, on and off, since 2004 at least. Last year February the idea was again postponed as further study was required. Even worse though is the mention of personal taxation which has happened on a few occasions, the last time I recall was a few months ago when the subject raised its ugly head again, supposedly as part of this single monetary area idea they are looking at for some of the Gulf region. This was around the time the rumours about Dubai being bankrupt surfaced again, apparently the Burj al Arab and a few other assets (Emirates airlines) had been sold to Abu Dhabi, so it seems to me these ideas pop up mostly a way of getting some money flowing into the coffers. In light of the first paragraph of the newspaper article this weekend it seems this may be closer to the real reason.

The UAE appears to have abandoned plans to implement value-added tax (VAT) for the time being, a top official said, adding that the worst for Dubai is over

As you would expect this latest news has been well received, welcomed in fact.

Now I don’t have a problem with taxation per se. Like Benjamin Franklin said, “in this world nothing can be said to be certain, except death and taxes”. Whilst annoying it does seem to be one of those necessary evils. What I do have a problem with is countries that implement something based on it seeming to be a good idea and working well somewhere else. The fundamentals have to be in place first. So implement tax if you must, but then realise that with it will come some expectation from the people paying the tax, namely some sort of social services to be provided in return, for example medical care or unemployment insurance or pensions or schooling (take your pick). And please also ensure that the existing fees for things like residency visas or national ID cards are adjusted downward to keep the cost of living competitive.

I certainly think that if the UAE were to implement personal taxation a number of people already living here (myself included), or planning to come here, would seriously reconsider.

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