IMF recommends not just VAT, but also tax on cars, and on all companies

Tax reforms could help country raise as much as 4.1% of non-hydrocarbon GDP as reported this week by Gulf News .

The UAE government could diversify its revenues and strengthen its fiscal position by implementing not just a value-added tax (VAT) system, but also a special excise on cars and corporate income tax on all companies.

In an early August 2015 report, the IMF (International Monetary Fund) said the UAE could generate extra revenues worth as much as 4.1% of the non-hydrocarbon domestic product (GDP) by introducing a 15% tax on passenger vehicles and by also broadening the coverage of its corporate income tax scheme, aside from collecting a 5% VAT.

The UAE has a tax-free with no personal income tax or value-added charges collected from residents in the country.  In an attempt to further diversify its revenue streams, especially amid falling oil prices, the country has recently deregulated the prices of petrol stations retailed fuels.

However, some 20% is levied on foreign banks, while a local municipal property tax of 5% is generally charged on the rental value and 10% local tax on hotel services.

According to the IMF, the current tax structure not being able to raise enough money for the economy, the recourse to additional revenue-generating reforms will have to be implemented.  Collecting VAT alone will help the country raise extra income worth 2.7% of non-hydrocarbon GDP, according to the IMF.

But aside from VAT, Road Tax and / or excise duty from vehicle owners could also be worth looking into as the IMF argues that public use of automobiles entails costs, such as those related to maintenance and upgrade of road networks, as well as productivity losses due to traffic jams, among others.  By collecting an ad valorem tax of 15%, the government could raise an extra 0.6% of non-hydrocarbon GDP.

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