The Dubai Government's tax revenues from international banks operating in the emirate plunged after the global financial crisis.
Tax collection tumbles following global crisis
The Dubai Government's tax revenues from international banks operating in the emirate plunged after the global financial crisis and are expected to dip sharply again this year, according to estimates from the Department of Finance.
A bond prospectus published by the Dubai Government reveals that the emirate reaped Dh1.113 billion (US$303 million) in income tax last year, a 17 per cent decrease on the previous year.
Unlike other countries, the UAE does not impose income taxes on individuals. Yet profits at international banks are taxed at 20 per cent, the prospectus reveals, accounting for all the emirate's income tax revenues. What is more, the tax makes it possible to estimate the profits made by those same banks. The tax revenue recorded last year would reflect profits of about Dh5.56bn.
"The fall in revenues from the income tax category of 17 per cent in 2010 compared to 2009 reflects the impact of the global economic downturn on the banking sector in Dubai," according to the prospectus. The department estimates a further decrease of 14.4 per cent this year which, if correct, would suggest UAE profits made by international lenders could fall to an estimated Dh4.76bn.
The UAE's 28 international lenders provide only scant detail on the financial health of their operations here.