Nearly 50% of UAE residents concerned about cost of living

The UAE introduced a 5 per cent value added tax rate on January 1



Nearly half of UAE residents are concerned about cost of living increases brought about by the introduction of value added tax, according to a new survey.

The UAE introduced the 5 per cent tax rate on January 1. It applies to most goods and services including food and beverage items, fuel and utility bills.

Read: Revealed: Goods and services subject to VAT in the UAE

The December survey of 200 residents by comparison site yallacompare showed 44.6 per cent of residents were worried about not being able to afford the increasing cost of living after the tax.

This compared to 51.8 per cent that were slightly worried but confident they wouldn’t feel much impact and 3.6 per cent that weren’t worried at all.

“The introduction of VAT is clearly a positive step for the UAE to take as it continues to diversify its economy away from oil,” said yallcompare chief finance officer Jonathan Rawling. “However, it appears that large numbers of UAE residents are simply considering VAT as an additional expense to be dealt with in the short term.”

The survey showed 62.5 per cent of residents expected a salary rise in 2018 to cope with cost of living increases and 80 per cent said they were confident about keeping their job.

However, there were signs of a more cautious approach to spending with 32.1 per cent off residents putting off a big purchase like a car or house last year.

In comparison, 39 per cent expect to make a big purchase this year and 40 per cent of those that put off a big purchase in 2017 expect to do so in 2018.

HR consultancy Korn Ferry Hay Group forecast in a recent study that the average UAE wage increase of 4.1 per cent would not keep pace with the 4.6 per cent inflation rate expected in the country this year, meaning a real wage reduction of 0.5 per cent.

Read: UAE salaries to decrease in real terms this year

Forecasts last year indicated VAT could increase the cost of living in the UAE by 2.5 per cent.