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Welcome VAT as Coins of Contribution for The Nation's Growth

CA. Sahitya K. Chaturvedi
Head of Accounts - Ajmal Perfumes, Dubai.

Dubai, UAE, June 13, 2017:  What is VAT in Khaleej, may not be a question as on date but how much significant is VAT for the nation’s growth, is certainly an aspect that would be understood by Business Entities as well as the residents who are quite uncertain after the announcements of Levying the Value Added Tax in GCC.

Certainly, there can be the social economic challenges in the region once implementing the VAT but the one should accept this as a coin of contribution than a coin of levy to the nation’s economy.

Value Added Tax is a matured concept since 1918 and first implemented at country level in France in 1954 and still accounts the most important source of State Finance.

Presently there are more than 190 countries that contribute a fifth of total tax revenues both worldwide and among the members of the Organization for Economic Co-operation and Development (OECD).

VAT is a general tax on consumption levied on supplies and import of goods and services. In context of implementing in GCC this is proposed to be levied in the UAE effective from January 1, 2018 a standard VAT rate of 5% is proposed with zero rated or exempt categories for certain goods and services. 
Although GCC are practicing some kind of direct and indirect taxes yet the coverage of VAT is much wider and significant in the present socio-economic environment.

Comparing the aforesaid rate of VAT as proposed in UAE, the highest rate is currently in operation in the EU is 27% (Hungary)

Internationally most of the major economies are having the VAT or GST system i.e. EU VAT is European Union Value Added Tax a value-added tax encompassing member states in the European Union VAT area that is compulsory to join by members State. Subject to provisions including the reduced rates in some cases, EU VAT are levied on consumption of the goods and services at minimum of 15%.

China implemented the VAT in 1984 and presently contributing for more than one third of China's total tax revenue per year. The standard rate of VAT in China is 13% to 17%.

The like taxation in Australia is named as Goods and Services Tax (GST), implemented in the year 2000 Whilst the rate is currently set at 10%, there are many domestically consumed items that are effectively zero-rated (GST-free) such as fresh food, education, and health services, as well as exemptions for

Government charges and fees that are themselves in the nature of taxes. 

The goods and services tax (GST) was introduced in New Zealand in 1986, currently levied at 15%.

In general, the VAT which is charged by a business and paid by its customers is known as 'output VAT' and the VAT that is paid by a business to other businesses on the supplies is known as 'input VAT' wherein A business is generally able to recover input VAT to the extent as defined by legislation from the output VAT. 

In particular to GCC where in UAE, KSA and Oman have announced to implement VAT in concurrence of joining by all the GCC members States in a phase wise manner, the rate of 5% at standard is quite nominal and will support to region’s unity, growth and the ongoing infrastructure development.  

With reference to the announcement of 1st January 2018, there will be some critical challenges that may cascade from Business to Consumers at mass level because the threshold limit of AED 375,000 as annual revenue will imply most of the business establishments to adhere the VAT legislation and penalties in case of violations.

VAT implementation in any organization can be very simple to monitor and comply with if all the systems are in right place, but it can be equally high complex and costly if systems and staff are not fully equipped.

Therefore we must recognize the situation as high time to revisit the IT systems, accounting teams, management training, and the format of preprinted stationeries so that the prose of legislation can be implemented to gain the Value added coins and subscribing the same for the nation’s growth in business-friendly manner. 

Posted by : Publilink Dubai, Publilink
Viewed 6814 times
PR Category : Banking & Investments
Posted on : Tuesday, June 13, 2017  3:54:00 PM UAE local time (GMT+4)
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