IMF Proposes Tax Measures To Reduce UAE's Dependence On Oil

by Lorys Charalambous, for LawAndTax-News.com, Cyprus

01 July 2004

Following the conclusion of its Article IV consultation with the United Arab Emirates, the International Monetary Fund (IMF) praised the UAE government for its macroeconomic prudence and outward-looking development strategy, but suggested that the Emirates need to broaden their revenue base in order to reduce dependence on oil and gas.

The annual IMF report endorsed the pegged exchange rate and agreed with the direction of monetary policy in the UAE, observing that the government's prudent macro-economic policies have created an environment with low inflation and high growth levels.

"The UAE is in a strong position to take advantage of the global recovery and the macro-economic outlook - over the medium term - remains strong. To sustain these encouraging developments, it is essential that the country strengthen its fiscal policy and the financial sector, and also further strengthen the economic structure," the report observed.

The IMF went on to suggest that in order to reduce the jurisdiction's reliance on oil and gas revenue, the UAE should consider introducing a value-added tax, in coordination with other countries in the Gulf Cooperation Council (GCC).

The multilateral body also proposed an expansion of the corporate tax base and the introduction of a local property tax.

Recommended