VAT in UAE: minister faces FNC grilling over tax impact

Sharjah member Dr Saeed Al Mutawa will be quizzing Obaid Al Tayer about whether the government is planning to raise salaries of employees to cope with the inflationary impact

Abu Dhabi, United Arab Emirates. December 24, 2013///

Obaid Al Tayer, Minister of State for Financial Affairs. Federal National Council session. Abu Dhabi, United Arab Emirates. Mona Al-Marzooqi/ The National 

Reporter: Ola Saleem 
Section: National 
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Members of the Federal National Council are expected to grill the finance minister on Tuesday over the inflationary impact of value added tax (VAT).

VAT will be introduced on January 1. The impact of the tax is still being hotly debated.

Sharjah member Dr Saeed Al Mutawa will be quizzing the Minister of State for Financial Affairs, Obaid Al Tayer, about whether government plans to raise salaries of employees to cope with the inflationary effect of VAT.

Dr Al Mutawa said: "There is no debate about implementing VAT." He understood the imposition of VAT was “a way for the government to balance its books and reach for a quality, controlled budget” by diversifying income sources.

However, “the issue is that implementing VAT will have implications for the inflation rate.”

He added that while the market will eventually regulate itself based on supply and demand, people will be affected by the inflationary effect on services and not just goods, which they could cut down on.

Dr Al Mutawa will also ask Mr Al Tayer to explain the effects VAT will have on the national economy.

“Neither you, nor I nor society knows what will happen after VAT, the taxes authority should have done a study on the effects, which they have not published by the way, so we want him to explain to us a bit,” he said.

Dubai member Hamad Al Rahoomi, will be asking the minister if they have looked at the readiness of the banking sector for VAT. Bank executives had previously requested that VAT be postponed for six months, in their sector, to give them time to prepare.

Member Marwan bin Ghalita will ask the minister what the government will be doing to educate the public on the application of VAT.

The council is also expected to pass a draft law for the 2018 federal budget.