The International Monetary Fund has issued a new set of recommendations to the UAE to make up for oil revenue losses, estimated to be at $42 billion dollars, Arabian Business reported Monday. The IMF recommended that the Gulf country increase its corporate income tax, introduce a tax on consumer goods and implement a 15 percent special excise on cars.
The UAE's economy, which relies majorly on oil revenues, has taken a hit since oil prices have plummeted over the last year, forcing the government to change tactics.
The organization hinted that if the implementation of its recommendation went as planned, the UAE would be able to generate an extra 7.4 percent of non-hydrocarbon domestic product, which would alleviate the oil losses the country has registered for this year.
Although the UAE already has a 10 percent corporate income tax in place, the IMF pushed the country to extend it to more firms while the government said it would consider this option after launching an impact study.
As for implementing a VAT, local officials told the organization that they were in conversation with the rest of the GCC countries to introduce a coordinated plan, but didn't elaborate on when this plan could be executed. This will be a different track to the country, which has attracted expatriates for being mostly tax-free. Raising consumer taxes could jeopardize the country's attractive image, but citizens will not be as affected due to the different benefits that would outweigh increasing costs.
But the Gulf country remains hopeful that it can pick itself up, as it has already started to implement certain taxes, including a tourism tax on hotel bookings, another on Sheikh Zayed Road, and a recent fee to help fund innovation in the country. In an IMF report published this month, the economic outlook was still positive, especially with Expo 2020 around the corner, which economists have predicted will generate 4.6 percent non-oil growth.