Head of International Monetary Funds mission, Natalia Tamirisa said “ the VAT rate of 5% which was imposed earlier this year has caused a big administrative and cultural shift in the county which earlier has a minimal taxation”
She also added ”Given the challenges faced, the VAT has gone easily and inflation which has jumped in response should now be moderate”.She emphasized to the Reuters post her visit to the UAE for the talk with authorities that the introduction of VAT has been relatively smooth and managed well.
Tamirisa said that the impact of VAT will be short lived, as the annual consumer price which inflated in January to 4.8%,which is the highest compared to 2015 dropped back in March to 3.5% and also VAT cannot be blamed because inflation has also dropped in areas of economy which is not under VAT cover.
Mellowing real estate markets in Dubai and Abu Dhabi have shown a decline in residential rents which was a heavy weighted in the consumer price index. Inflation is predicted to average out to 3.5% this year, which is nearly 2% up from last year but Tamirisa predicts that it will finally settle to 2.5% roughly.
Tamirisa said that in the long run it is expected the new tax will lift the revenue by 1.5% of the GDP (Gross domestic product). The property market was having a major economic impact which is getting monitored with an eagles eye by the authorities. According to the Central Bank, the average rent in Dubai declines by 5.2% in Dubai and by around 10.2% in Abu Dhabi has cause the major crunch.
Tamirisa ensured that extra effort is made this year to keep the prices soft, as there is a continuous supply coming into the market which would ensure to bridge a balance between the supply and demand.
The authorities have taken major steps to limit contemplation; in comparison to the Dubai financial crisis the weak property prices did not pose a requisite threat to the economy as they earlier did.
Tamirisa clearly stated that it was too early to comment or assess the impact which has happened on the UAE from the pullout of the Iran nuclear deal of the USA. Point being that the impact on Iran itself was not yet clear for the UAE can only benefit if Iran would find it hard to sell its oil which will give the Arab oil producers a more room to expand their crude exports at a fairly higher price. Bu the economist differ stating that Dubai has close business links and this could suffer with Iran.