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Abu Dhabi, UAEFriday 20 July 2018

Wide-ranging changes to boost UAE's economy and Government revenues

Hotels are cheaper, housing and alcohol more expensive, plus a Dh50 billion boost for Abu Dhabi and red tape slashed for businesses

For a month that is regarded as one of the quietest of the year, this Ramadan has seen a series of far ranging Government announcements that will affect the lives - and pockets - of almost everyone living in the UAE.

For the average resident, the most immediate impact will be on their monthly housing costs, with the municipality fee charged by Abu Dhabi more than doubling for villas and rising by two per cent for other homes, according to the website of Abu Dhabi Distribution Company, the power and water body that will collect them.

It will add thousands of dirhams a year to household costs for some families, but will be felt by anyone who rents. Yet it may also add to the downward pressure on rents being felt by landlords, potentially offsetting the increase.

Drinkers will also face a squeeze with a new 30 per cent tax on alcohol in Abu Dhabi from June 15, along with a Dh230 fee for an alcohol licence – previously free.

That rate of taxation is still significantly lower as a percentage than other “sin taxes” like the 50 per cent imposed on sugary drinks last year and the 100 per cent on tobacco.

It will be off-set to an extent by a lowering of the taxes for hotels and hotel restaurants in both Abu Dhabi and Dubai.

While new fees and taxes might grab the headlines, they are relatively minor compared with the fundamental changes proposed in the way both Abu Dhabi and Dubai do business.

Most significant is a Dh50 billion stimulus package for Abu Dhabi announced by Sheikh Mohammed bin Zayed, Crown Prince of Abu Dhabi and Deputy Supreme Commander of the Armed Forces, last week.

The 10-point proposal comes with instructions that the Executive Council of Abu Dhabi has 90 days show how it will be implemented.

Among the headlines are a new licence that will allow people to work from home without renting office space, and an expansion of the free zone network that means companies based there will now be able to bid for Government contracts.

The business-friendly tone of the plan continues with an investigation into the regulations faced by both private and public developers, with a view to streamlining them, and to cut down the often lengthy time it currently takes Government bodies to pay up for work by contractors.

Collaborations between the private and public sectors are to be made a priority, along with support for new tourism projects and developing local industries.

Sheikh Mohammed has made it clear that he wants the measures to create 10,000 new jobs for Emiratis within three years.

In a separate announcement, he also revealed plans for a new sweeping social support programme for Emiratis, with financial support where needed and an expansion of home loans with repayments tied to income.

The suburbs of Abu Dhabi, including Khalifa City, Mohammed bin Zayed City and Madinat Zayed were also given Dh3 bn to improve services for both citizens and residents.

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Read more:

Abu Dhabi's Dh50bn stimulus will boost economic growth, property market

Sheikh Mohammed bin Zayed announces new social support programme

ADDC website reveals new rates for municipality fees in Abu Dhabi - more than doubling in some cases

Abu Dhabi to cut tourism and municipality fees at hotels and restaurants

Dubai hoteliers boosted by reduction in municipality fees

Abu Dhabi to introduce 30 per cent alcohol sales tax

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Building a sustainable and diversified economy also requires create revenue streams for Government services that do not depend on oil and gas income.

Despite the new charges for housing and alcohol, not everything is becoming more expensive. First Dubai and then Abu Dhabi announced that the taxes on hotel stays, including restaurants, would be reduced.

In Dubai, the current 10 per cent municipality fee will be cut to seven per cent, with the aim of boosting tourism, although the date for the new lower charges has yet to be announced.

For hotels in Abu Dhabi, the six per cent tourism fee will be lowered to 3.5 per cent for hotels and outlets, the municipality fee from four to two per cent and the room per night charge cut from Dh15 to Dh10.

Again, the intention is to stimulate tourism, and again, no date has been given for the lower charges.

Dubai has also said it will scrap 19 fees relating to aviation, freeze private school fees for the next academic year and put a hold on fines for the late registration of properties for 60 days.

The aim is boost economic growth and attract investors.

Rising education costs have also been a concern for many families, as companies also cut the allowance they give for children at private schools.

Abu Dhabi this week launched a new model of affordable private schools in collaboration with the public sector and with significantly lower annual fees.

The new schools will be the first time the Abu Dhabi Department of Education and Knowledge has moved into the private sector, with annual fees at the new schools ranging from Dh20,000 to Dh30,000.

To understand what the changes mean, a longer view is needed. An expanding economy, stimulated by reforms, creates more, and better paid jobs, with a higher disposable income. And that means, in the end, everyone is better off.