CFA Society Emirates, the association for financial and investment professionals in the UAE, on Monday unveiled the results of a survey which assessed the impact of introducing value added tax (VAT) across the GCC.
With the UAE set to become the first country to introduce VAT by 2018, 82 per cent of the respondents said that this will lead to higher inflation rates.
They noted that demand for luxury goods will be affected the most by additional VAT costs followed by cars, then tobacco and real-estate, according to a press release.
According to the survey, consumers in the region will have to bear the additional costs VAT will introduce, instead of retailers, as it is ultimately paid by the end consumer.
Amer Khansaheb, president of CFA Society Emirates, said that the CFA professionals see VAT as a paradigm shifting reform in the GCC’s fiscal policy and are unanimous that it will lead to higher inflation.
He said, “Although inflation rates are also heavily influenced by interest rates and economic growth, the immediate effects will pose challenges to both consumers and businesses. The additional costs will only be marginally felt by the day to day consumer, but it will have a bigger effect on higher budget purchases. Around 73 per cent of the professionals surveyed stated that consumer good are more expensive in the GCC than their home country; hence VAT will add an additional burden to consumers, leading to higher prices and resulting in inflation.’’
Source: MuscatDaily