Corner shops take stock of VAT impact
Owners report a drop in sales but say the levy is good for the country
More than a week after the introduction of VAT, reactions among owners of Abu Dhabi’s corner shops have been mixed.
Four of eight shops visited yesterday said sales were down. But the rest said the situation was the same, or that it was too early to judge.
A week ago, Mohammed Shameam, manager of a Baqala in Al Nahyan, had speculated VAT could cause a slowdown in sales.
Yesterday, Mr Shameam said there had been a small impact.
“Everybody is talking about it,” he said. “Cigarettes and soft drinks have already gone up in price.
“Some people now say, ‘How can we afford another 5 per cent?’ Some salaries have not increased and expenses are going up. But largely it’s OK.”
At another corner shop close to Al Mariah Mall, the manager said business was down over the past week.
“Yes, of course,” he said. “There has been less business. People are buying less and it’s not like before. Instead of buying 2 litres of milk, people are buying 1 litre.”
The manager said this was happening across the board.
Some people were now purchasing single-serving sachets of coffee instead of jars.
“People know about it and the reaction is mixed. The tax is good for the country, though,” he said.
VAT came into force on January 1 and its introduction is expected to boost revenues by as much as Dh12 billion in the first year, said Sultan Al Mansouri, the Minister of Economy. School fees, health care, residential rent and public transport are exempt.
But some analysts have speculated that it could result in an increase in the average cost of living by as much as 2 per cent.
Two other corner shops in the Khalidiya area also reported that sales were slightly down.
“It’s a bit less busy than usual,” one worker said. “Of course, everybody is talking about it.”
Over the past few days, there have been complaints about the rounding up of prices.
But Abu Dhabi’s Department of Economic Development clarified last week that shops in the emirate were allowed to round up the cost of products by 20 fils.
Many of the smaller shops are rounding up or down on a case-by-case basis, and most of the larger chains have a policy of rounding up or down to the nearest 25 fils.
At the Suhaila Baqala close to the Russian embassy, manager Mohammed Jamal predicted that VAT could affect sales for the first month or two, but that people would adapt.
“All the customers know about the VAT,” he said yesterday.
“There has been no impact on sales so far.
“In rare cases, some lower-income workers have had problems and people are asking for their invoices.
“But generally there are no problems. No complaints. It’s the law of the Government.” Sheikh Mohammed bin Rashid, Vice President and Ruler of Dubai, said on Sunday that 70 per cent of VAT takings would be reinvested in local services.
And Mr Jamal is hopeful that his business could benefit from the tax.
“We are hoping now that perhaps the business will grow because the Government might bring new projects,” he said.
“People will come for jobs and there will be good business in the future.”