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Abu Dhabi, UAESunday 22 April 2018

Almost half of UAE residents worried about increased living costs from VAT

According to a new survey, residents fear they will struggle to afford their lifestyle but most are expecting a salary increase this year

The introduction of VAT and higher oil prices will push inflation higher in the UAE, notes BMI. Mona Al Marzooqi / The National
The introduction of VAT and higher oil prices will push inflation higher in the UAE, notes BMI. Mona Al Marzooqi / The National

Almost half of UAE residents are concerned they cannot afford the increased cost of living brought on by VAT, a new survey has revealed.

According to a study from the price comparison website, yallacompare, 45 per cent of respondents were “worried” about the effects of the tax being added to products.

“The introduction of VAT is clearly a positive step for the UAE to take as it continues to diversify its economy away from oil. However, it appears that large numbers of UAE residents are simply considering VAT as an additional expense to be dealt with in the short term,” said Jonathan Rawling, chief financial officer of yallacompare.

The poll of 200 UAE residents, carried out in December, also found that 52 per cent of those polled were “slightly worried” about rising costs but were confident “they won’t feel many effects”. Just 4 per cent said that they were not concerned at all.

Last week, some residents complained of prices being rounded up following the introduction of VAT. Abu Dhabi’s Department of Economic Development clarified on Thursday that shops in the emirate could round up the cost of products by 20 fils.

A product that is Dh1.05, for example, can be rounded up to Dh1.25 – a 25 per cent increase from the pre-VAT cost.

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Read more:

VAT in UAE: Abu Dhabi shops can round low-cost items by up to 20 fils

UAE residents cut back ahead of VAT introduction

Challenges remain as the UAE eases into VAT

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A large proportion of those polled (63 per cent) expect a salary increase in 2018 to offset the effects of VAT, and four in five were confident they would retain their job, according to the yallacompare study.

Last month, UAE residents told The National how they planned to cut back their spending to balance out the effects of the tax. Kelly Al Muhairi, a Welsh teacher, started a personal drive to become thriftier with her money by planning meals and taking a packed lunch to work.

“I’m giving travelling to the UK for the winter break a miss this year,” she said. “And I’ve cut down my nail salon trips, which are going to get more expensive.”

According to the yallacompare study, one in three UAE residents put off big purchases, such as cars or houses, in 2017. However, of these, 39 per cent will still make a big purchase this year despite VAT being applied.

“The fact that the introduction of VAT should result in a more stable economy overall has perhaps been lost on many people,” said Mr Rawling. “But once the initial shock of consumer prices rising has worn off, we believe that the other benefits of VAT – such as improved government services and greater business confidence – should be clear to the majority of residents.”