VAT can be a bitter pill to swallow, says commercial lawyer Michael Patchett-Joyce, but soon come the beneficial effects of the medicine
One month into VAT, teething problems just show us where to go next
Introduced one month ago on January 1, VAT has already been a big change for businesses and the Federal Tax Authority (FTA) alike. A few teething problems were inevitable, but that is a good thing – that way, it's easier to identify the areas that need work.
And there is still work to do. The details still need to be fleshed out and some aspects of the practical application of the new laws are yet to be fully understood. There is no room for complacency, especially in ensuring uncooperative businesses are compliant, but it has so far been a change that has proven to be far from the chaos some foresaw. The FTA has shown itself responsive to requests from VAT advisers, and should continue to be so.
A month down the line for consumers, with all taxable businesses well into their first accounting period and with the FTA having faced a welter of inquiries, everyone is beginning to get used to VAT – it is the new normal. Now, the focus must be on sorting the wheat from the chaff and acknowledging the efforts of those who are compliant. Principled differences over the application of the law must be resolved constructively, and ignorance of the law not allowed to be used as an excuse.
Cooperation between the FTA and businesses, wherever possible, is key to the success of a self-administered tax.
For consumers, it is a bitter pill to swallow, but it's followed by the beneficial effects of the medicine. It is a collective leap of faith, but the Federal Government has confirmed that the tax will be spent for the greater good – the give and take of taxation is not a one-way street where the taxed do all the giving.
Michael Patchett-Joyce is a commercial lawyer and arbitrator, based in London and the UAE.