(Bloomberg) The United Arab Emirates is setting up a federal tax authority that will be in charge of collecting levies, as the oil-rich Gulf nation seeks to diversify its revenue base with value-added taxation.
The ministry is advertising about 30 staff positions for the tax authority on its website, including a compliance and enforcement director, auditors, analysts, accountants and administrators. Deloitte LLP is advising the Ministry of Finance on the structure and enforcement mechanism of the new government entity, according to two people familiar with the matter who spoke on condition of anonymity because the information isn’t public.
Taxation has long been a taboo in the six-member Gulf Cooperation Council, which includes the U.A.E., but a collapse in oil prices is forcing states to rethink their stance as they attempt to broaden revenue collection. The bloc is planning to impose VAT by 2018, while Kuwait is also planning to impose a 10 percent rate of corporate taxation and Saudi Arabia said in June it was mulling taxing the income of expatriates living in the kingdom.
The U.A.E. finance ministry declined to comment. Deloitte, in an e-mailed answer to questions, said its business depended on client confidentiality and it wouldn’t “discuss rumors.”
Gulf News reported in January that the U.A.E. expects to generate about 10 billion dirhams ($2.7 billion) to 12 billion dirhams from VAT in the first year of implementation. It cited finance undersecretary Younis Al Khouri as saying the duty will range between 3 percent and 5 percent.
The IMF estimates the U.A.E. it will post a budget deficit of 3.9 percent of economic output this year, wider than 2015’s 2.1 percent. It booked a surplus of 5 percent in 2014.
To ease the pressure, officials have cut fuel subsidies and halted or scaled back some major projects. The richest of U.A.E.’s seven sheikhdoms, Abu Dhabi, has embarked on a consolidation drive merging institutions from banks to universities in an attempt to cut costs.
The measures have pushed many to speculate that income tax might not be that far away. But that’s something the IMF’s chief for the Middle East thinks unlikely.
“Before we get to income taxes, there are other taxes that are probably more feasible in this current structure,’’ Masood Ahmed said in an interview in Dubai, such as levies on corporations or property.