VAT in the Gulf Cooperation Council
Edited by Ehtisham Ahmad and Abdulrazak Al Faris
Chapter 11: Institutions, Political Economy, and Timing of a VAT: Options for Dubai and the UAE
Ehtisham Ahmad* The Dubai government, and on its behalf Dubai customs, have been at the forefront of the investigation of the VAT as an option for the GCC countries. Preparations for implementing the VAT are also underway with the help of a project team that is located in Dubai customs. As the UAE is a federal country, questions naturally arise as to the level at which VAT policy might be set, as well as the appropriate location of the administration of the VAT, and more importantly how the monies might be shared between the members of the federation. If a decentralized administration model is chosen and the VAT becomes the responsibility of each of the seven Emirates the bulk of the revenues remain in the Emirates in which these are generated, and the issue becomes one of how to manage interEmirate transactions and refunds. More importantly, new administrations will have to be established in each of the Emirates. If a centralized administration model is chosen, with a new federal revenue agency, the main issue boils down to how the revenues might be shared between the federal government and the Emirates, as well as the distribution across the individual Emirates. The political economy of the VAT reforms should not be underestimated. It is clearly in the interest of the wealthier “trading” Emirates, including Abu Dhabi and Dubai, to replace customs duties phased out by the free trade agreement with the VAT. However, it will be important to share the gains with...
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