MOVERS & shakers
Clear communication is essential to ensure effective compliance, every single employee should be aware of how the business model has to change in order to incorporate taxes. Budgets need to be carefully planned in advance to reduce and/ or manage the financial impact of taxes.
prepare revised financial statements for prior year comparison when taxes are eventually introduced, revisit contract clauses dealing with price and taxes (change in law clause, taxes inclusive/exclusive), quantum of tax to be passed on gross or on net basis, and assess your organisation’s tax awareness, especially in the finance function.
How can businesses assess internal awareness and compliance prior to the introduction of corporate tax and VAT?
Clear communication is essential to ensure effective compliance, every single employee should be aware of how the business model has to change in order to incorporate taxes. Budgets need to be carefully planned in advance to reduce and/ or manage the financial impact of taxes. Further, businesses should conduct a careful review of the processes and assess tax resource capability to understand the impact of the tax as well as to determine what should be done to prepare to be fully compliant.
one-off marginal inflation impact. Businesses may consider to absorb the VAT wholly or partly initially to ease the burden on the consumer and to avoid consumers (individuals and businesses) from looking for a bargain elsewhere.
Given the fall in oil prices, will the introduction of corporate tax and VAT help diversify the economy?
The decision to implement tax is certainly going to help diversify sources of revenue for the government. The volatility of oil prices in recent months has led the UAE government to look at other steadier sources of revenue, which include VAT and corporate tax. Most nations have adopted a tax system in order to boost their revenue, which ultimately is invested into the growth of the economy. The decision to implement taxes will eventually help the UAE move towards becoming more developed, however the government should ensure that there are sufficient education programmes for businesses in order to ease the transition.
How is the introduction of VAT likely to impact consumers, their spending and Dubai’s retail sector?
The UAE government could implement VAT at a lower rate (suggestions from IMF - below five per cent). If the rate is relatively low, it should not impact consumer prices to such an extent that it would discourage purchases, however consumers will feel a
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