DUBAI // Easy recovery of VAT for tourists is required to ensure they continue to come and spend.
A tourist refund scheme is provided for in the GCC agreement and is being considered by the UAE, said David Stevens of accountancy firm E Y.
He said such a scheme would encourage tourist spending.
Marie-Claire Accordino, founder of the The Accounts Dept, which provides bookkeeping services for small and medium-sized businesses, said it was really important for non-residents to be able to easily reclaim tax on goods here.
“People might pick and choose where they go and shop. If you are buying a luxury handbag from Prada or Chanel, it is a significant purchase for which people may go to another country.”
Aviva Nazareth, a British expatriate, said she saved making big purchases for when she was in the UK.
“The UK is a lot cheaper,” Ms Nazareth said. “Non-residents get 20 per cent VAT back and the exchange rate is favourable, so it makes more sense.”
The 20 per cent VAT in the UK and 7 per cent in Singapore can easily be reclaimed by tourists.
Indirect charges are paid across the GCC, such as Salik toll fees, municipality and housing fees and Customs duties.
“In my opinion, it will not hurt the UAE’s image for business location decisions,” said Justin Whitehouse, of the Deloitte Middle East consultancy. “Businesses don’t tend to consider VAT when considering where to locate.
“Likewise, people choose where to live based on where jobs and opportunities are. They may take into account personal income tax levels and prices, but VAT on its own isn’t part of that process.”
Experts agreed 5 per cent VAT would not affect business decisions.
“If you look at the concern of businesses, it’s more about the regulatory environment, infrastructure,” said Jeanine Daou of consultancy PricewaterhouseCoopers.
“So 5 per cent VAT will have some effect, but will not be a driver for businesses to decide to invest or not in the UAE.”