Most residents expect VAT to be a challenge for UAE – survey

The majority of UAE residents (62 per cent) expect the introduction of value added tax to be a challenge for the country, according to a report by YouGov.

The online survey of 1,022 residents, conducted in the weeks after the 5 per cent tax’s January 1 introduction, also revealed concerns regarding cost of living increases and potential new taxes on the horizon.

But there was some disagreement as to overall impact, with 38 per cent feeling this would be positive, 40 per cent neither agreeing or disagreeing and 22 per cent disagreeing.

Read: UAE finance ministry says VAT will have “small impact” on society

More than four in 10 respondents (44 per cent) said they expected spending to increase significantly as a result of the tax and the same percentage felt it would reduce their disposable income.

Looking at specific areas, more than half of residents expected to spend more money this year, with 49 per cent expecting to spend the most additional cash on fuel and their daily commute and 48 per cent on groceries.

Based on these viewpoints, 46 per cent of survey respondents expected a relative pay increase to compensate for their rising cost of living.

There was less certainty regarding the impact of VAT on financial dealings.

The majority of respondents (55 per cent) neither agreed or disagreed that the tax would regularise lending to SMEs, 28 per cent agreed and 17 per cent disagreed.

Nearly four in 10 (39 per cent) believed the law would bring transparency to company accounts but 42 per cent were unsure and 19 per cent disagreed.

Responses were mixed regarding the tax’s impact on tourism, with 35 per cent saying it would discourage tourists, 37 per cent unsure and 28 per cent disagreeing. In contrast, 42 per cent thought it could discourage expats to move to the country, 38 per cent didn’t know and 21 per cent wouldn’t say.

In a throwback to concerns highlighted in the media last month, 45 per cent of residents saw a lack of lower denomination change complicating single cash transactions and the majority of respondents (54 per cent) also expressed concerns that the introduction of VAT could mean income tax would follow.

Read: UAE shops told to give correct change after VAT

However, there were also indications of an optimistic outlook for the year ahead among residents, with 50 per cent of respondents expressing positive sentiment, 34 per cent neutral and 15 per cent negative.

“As the UAE is getting to grips with VAT, this research reveals a community still largely uncertain of its future impact. It’s clear there are reservations over the scale of increased expenditure and the impression the law will have on outsiders, but the results don’t conclude a trend in favour or against it,” said YouGov head of Omnibus research Kerry McLaren.

“The fact that sentiment for 2018 is largely positive shows the country to be in a solid position, with a community yet to reserve strong judgement on VAT as we start the new year.”

The survey was conducted from January 18 to 24.