Business booms as VAT’s first day looms
Retailers yesterday reported a sharp rise in business as shoppers rushed in to beat the 5 per cent value added tax to be introduced less than 48 hours later.
“Definitely there are more customers,” said Mathew Thomas, 43, an Indian sales clerk at an appliances store in Abu Dhabi. “They are thinking that after January 1, VAT will add another 5 per cent. Whatever they can get right now, they are stocking up.”
The UAE and Saudi Arabia will be the first two GCC countries to introduce the VAT as a way to raise income other than oil revenues to pay for costs such as roads, public schools, parks, waste control and public safety.
This year, both countries also introduced an excise tax, which doubled the price of tobacco products and energy drinks, and increased the cost of sugary drinks by 50 per cent.
Shoppers were yesterday mostly in support of the new tax, or resigned to its introduction tomorrow.
“It’s the country’s right,” said Reham Bakry, 28, from Egypt. “They are trying to find another source of income, so this is their right. We have to respect this.
“They will give us something in return. They will not collect this VAT for nothing, of course, so we are expecting more services.”
This year more than 130 countries imposed an indirect tax, such as VAT or sales tax, KPMG said. North America charged the lowest average indirect tax, about 5 per cent, while Europe collected the most, about 20.1 per cent on average, the consultancy said.
Ms Bakry denied going out of her way to buy items ahead of the VAT, saying she was just doing her regular shopping at the Abu Dhabi Mall.
“No, it’s something I’m thinking about,” Ms Bakry said. “Even if they increase the VAT, what I will do? I will buy the same thing.”
Nabil Nasser, 59, a Jordanian who has lived in the UAE more than 20 years, said he did not expect most shoppers
to be out panic-buying because the new VAT would not be so damaging.
“I don’t see it as having a big impact on the prices in general because already the prices are competitive before the VAT,” said Mr Nasser, who was shopping at a grocery store.
“I mean, if you are a smart shopper, you always look for the best offer between all the supermarket chains.”
The new tax would force people to become even more savvy with their budget and spending, he said.
“I look at it this way: if you spend Dh10,000 a month on average, 5 per cent is Dh500,” Mr Nasser said. “So if you skip one dinner, it’s already done.
“It’s not a big thing. If you make a small adjustment on your spending, this 5 per cent is not a big deal. This is the way I look at it.”
Compared to what other countries charge in indirect taxes, the VAT proposed by the UAE is “peanuts”, he said.
But for low or middle-income earners, the additional cost would not be so painless, said Angie Pastilloso, 30, from the Philippines.
“All of the products have VAT,” said Ms Pastilloso, who was buying grocery items for her New Year’s Eve celebrations.
“Your salary is still the same. That is the big problem.”
Basil Musa, 34, an American who has lived in the UAE for nearly half of his life, said even with the new tax the UAE was a more attractive option for him and other expats.
“To be honest, I’m happy here,” said Mr Musa, who was shopping for groceries. “I like investing my money here. It’s safe and everything is fine. We are happy. I love this country.”