The customs authority in the United Arab Emirates (UAE) has reportedly indicated that a plan to introduce a value-added tax system across the emirates by next year will have to wait until 2010 because more technical and feasibility studies are needed before that system can be implemented.
Saeed Khalifa Saeed Al-Marri, deputy director general of the UAE Federal Customs Authority told Bloomberg News that the introduction of VAT requires a huge investment in infrastructure and may not be possible until other states in the Gulf Cooperation Council (GCC) have similar systems in place.
"If we reach the point where it might come into effect, that means we have to study all the procedures, because it will affect the customs union and it will affect even the whole customs work in the UAE," the official told Bloomberg.
Under the GCC common market, set up on 1st January, 2008, a 5% common tariff is charged on goods entering the bloc, with revenues collected in the state of entry remitted on to the state of final destination for the goods.
The organisation charged with studying the possible imposition of a value-added tax system in the United Arab Emirates presented its findings in June 2008. Ahmad Butti Ahmad, Director General of Dubai Customs, which has been studying the VAT proposals, confirmed at the time that draft laws had been submitted to the UAE’s federal authorities and were awaiting approval.
The report on the level of VAT to be used in the UAE recommended a 3% threshold, but the final decision is to be taken by UAE’s federal authorities.
The new VAT system would replace revenues currently being raised by customs duties, but Butti said that the government had yet to decide on a date for the switch-over to take place.
Butti said that all GCC countries will implement VAT systems eventually, but he explained that Dubai was more ready to introduce VAT than most of these countries because it had initiated a methodology in 2006 to implement such a tax system.
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