DUBAI, 21 September 2004 — Businesses have welcomed a government denial that taxes will be imposed in the country after three years of speculation that such a move was imminent.
The denial was made explicitly by UAE Minister of State for Finance and Industry Mohammed Khalfan ibn Kharbash.
“There will be no introduction of taxes in the UAE,” he said in a weekend address at the American Business Council of Dubai and the Northern Emirates. “This is the policy.”
It was earlier reported that the International Monetary Fund (IMF) was pressuring the Gulf Co-operation Council (GCC) countries to adopt economic reforms, including the introduction of corporate income tax. Some reports said that the recommended rate of corporate rate was around two percent of the company’s annual turnover beyond a ceiling determined based on a set of factors drawn from the concerned country’s economy. Kharbash’s comment put to rest all such speculation and reports, particularly that it was suggested that the UAE could be the first GCC member to introduce taxes. Ram Baxani, director of Itl-Cosmos, the first registered company in the UAE, said that the UAE authorities had “realized that the administration of a tax regime is very difficult and exposes the system to manipulation.”
“Therefore it is their preference to levy service charges in lieu of taxes and this works out fine in this country,” said Baxani.
Similar views were expressed by top executives of several multinational companies, which were watching closely for signs of government moves toward imposing taxes. “Any form of direct tax would be detrimental to the interests of the UAE, particularly Dubai, to become the region’s top commercial, financial and industrial hub,” said Mark Harisman, senior executive of a UK-based company which has a large Dubai operation covering the GCC.
