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Abu Dhabi, UAEWednesday 14 November 2018

Khalaf Al Habtoor. Victor Besa / The National 

Leading Emirati businessman calls for reassessment of VAT in UAE

The UAE should consider temporarily scrapping VAT, a leading Emirati businessman has urged.

Billionaire Khalaf Al Habtoor claimed the move to implement the 5 per cent tax earlier this year was damaging to the economy.

In a wide-ranging interview the septuagenarian - with a reported net worth of Dh8.4 billion - also spoke out against what he described as unsolicited intervention by the International Monetary Fund.

He maintained fiscal and budgetary measures suggested by outside advisors should be treated with caution.

“The VAT came at the wrong time,” Mr Al Habtoor said. “Our government should reconsider and postpone it. Cancelling it for the time being....would be an excellent step.

“We (the UAE) have our own rules and regulations. We don’t need somebody from thousands of miles away to come and tell us what we are supposed to do.”

Mr Al Habtoor’s controversial remarks came last Thursday during an exclusive interview with The National.

As Chairman of Al Habtoor Group - one of the region’s largest conglomerates - the views of the self-made businessman carry sway and are influential among policymakers in the UAE.

In recent months, the outspoken executive has made his feelings known on a number of subjects including his proposal to end the ban on WhatsApp phone calls in the UAE. On China, the businessman is a fervent supporter of closer ties and increased bilateral trade.

On January 1 this year, the UAE took the pivotal step of introducing VAT for the first time.

The move had been advocated by the IMF for years in the GCC states and elsewhere, as part of reforms designed to lessen the region’s dependence on oil receipts.

Some sectors, however, such as health, education and public transport, continue to avoid VAT. The UAE for instance - home to two of the world’s largest airlines - has not imposed VAT on international aviation.

“There are certain things that we should eliminate now and one of them is definitely the VAT,” said Mr Al Habtoor.

“If you add it up it’s a lot of money. It is a heavy burden on the buyers, investors and everyone.

“I don’t know why the IMF comes here - we know our own body and we know where the sickness is and how to treat it.”

Despite Mr Al Habtoor’s concerns, financial experts continue to advocate for increased taxation as a means of raising non-oil revenue.

Saudi Arabia also implemented the 5 per cent VAT this year. The IMF has estimated the introduction of VAT in the region could generate new income of 1.5 to 3 per cent of non-oil GDP and officials at the Fund are understood to be pleased with its implementation in the two biggest Arab economies.

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Other Gulf countries, meanwhile, who had also agreed to implement VAT in 2018, have since delayed the move until next year. The issue remains controversial, with even Abdul Aziz Abdulla Al Ghurair, chairman of the UAE Banks Federation, claiming prior to its introduction that banks and insurers were not ready for the measure.

“People come here from all over the world because they know there’s no tax and suddenly they find this,” Mr Al Habtoor said.

From what started as a small engineering firm in 1970, the Al Habtoor Group now has international interests in sectors including hospitality, the automotive industry, real estate and publishing.

Mr Al Habtoor highlighted the importance of opening up the UAE economy to global markets, specifically referencing China as a key future partner.

“We have to improve our business with China; this is the future,” he said. China is huge now, not the Arab countries, not Europe, but China.

“We have to work with them and we have to sell to them. We shouldn’t concern ourselves with the relationship between the US and China.

“They are spending a lot of money here and we want to sell them everything.”