VAT could double to 10% in some GCC countries.
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VAT could double to 10% in some GCC countries.
The article is light on specifics but worrying nonetheless.
https://www.msn.com/en-ae/money/taxes/some-gcc-countries-could-double-vat-to-10percent-report/ar-BBIkNTY?li=BBqrVLO&ocid=mailsignout
https://www.msn.com/en-ae/money/taxes/some-gcc-countries-could-double-vat-to-10percent-report/ar-BBIkNTY?li=BBqrVLO&ocid=mailsignout
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The hard part about VAT is setting up the policies and procedures to collect it. Once that is all in place changing (increasing, it never goes down) the rate is very easy. For the government anyway, not so much for the people who have to pay it.
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Light on specifics...maybe. Its what is written between the lines which is troublesome.
Since it is a UAE paper and any such news is tightly controlled, I think we can all see what is coming over the horizon, actually the natives have been banging this drum for quite a while. The remittance tax would in effect be a double taxation assuming there would be an income tax as well.
If you run the numbers, for every AED 100,000 earned, you'd send home AED 80750 thus giving AED 19250 to the government...thats not including the effect of the (now) 5 % VAT possibly 10% if they elect to double it.
The impact would be disastrous.
QUOTE:
According to S&P analysts, the rollout of more corporate, personal and remittance taxes GCC countries could boost the government revenues up to 4.5 per cent as the region has some room to broaden the tax base due to low tax revenues by international standards.
"We estimate that even if the GCC authorities were to significantly expand the tax base, for example by implementing a 15 per cent corporate tax, a 15 per cent personal income tax, and a 5 per cent remittance tax, this would increase government revenues only by about three to 4.5 per cent of GDP," Cullinan said in a note released on Sunday.
S&P expects implementation of new corporate tax or income tax on expats and locals will be only gradual because of the economic and social pressures that could ensue.
Some GCC countries may prefer not to roll out fresh taxes to try to gain a competitive economic advantage, it said.
According to International Monetary Fund (IMF) estimates, a 15 per cent corporate tax on all GCC non-oil companies, both domestic-and foreign-owned, could generate government revenues of three per cent of GDP on average.
In addition, a 15 per cent income tax on expatriate workers could generate government revenues of two per cent of GDP on average, depending on the size of their expatriate communities.
Since it is a UAE paper and any such news is tightly controlled, I think we can all see what is coming over the horizon, actually the natives have been banging this drum for quite a while. The remittance tax would in effect be a double taxation assuming there would be an income tax as well.
If you run the numbers, for every AED 100,000 earned, you'd send home AED 80750 thus giving AED 19250 to the government...thats not including the effect of the (now) 5 % VAT possibly 10% if they elect to double it.
The impact would be disastrous.
QUOTE:
According to S&P analysts, the rollout of more corporate, personal and remittance taxes GCC countries could boost the government revenues up to 4.5 per cent as the region has some room to broaden the tax base due to low tax revenues by international standards.
"We estimate that even if the GCC authorities were to significantly expand the tax base, for example by implementing a 15 per cent corporate tax, a 15 per cent personal income tax, and a 5 per cent remittance tax, this would increase government revenues only by about three to 4.5 per cent of GDP," Cullinan said in a note released on Sunday.
S&P expects implementation of new corporate tax or income tax on expats and locals will be only gradual because of the economic and social pressures that could ensue.
Some GCC countries may prefer not to roll out fresh taxes to try to gain a competitive economic advantage, it said.
According to International Monetary Fund (IMF) estimates, a 15 per cent corporate tax on all GCC non-oil companies, both domestic-and foreign-owned, could generate government revenues of three per cent of GDP on average.
In addition, a 15 per cent income tax on expatriate workers could generate government revenues of two per cent of GDP on average, depending on the size of their expatriate communities.
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Personal tax and remittance tax would 100% see me out of this place in a flash. There would be zero reason to be here. It would cause chaos as the expats flocked to leave.
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They did say VAT will start at 5% 'initially'.
Initially meaning we will raise it every year just like we do with property rent.
They also said they will not VAT basic essentials...changed their minds a few months later.
Also mentioned Income tax will not be implemented 'initially'.......watch this space. This is just the beginning. Once they get the taste of the money rolling in....
Initially meaning we will raise it every year just like we do with property rent.
They also said they will not VAT basic essentials...changed their minds a few months later.
Also mentioned Income tax will not be implemented 'initially'.......watch this space. This is just the beginning. Once they get the taste of the money rolling in....
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I think the issue is not IF additional and higher taxes and fees will be levied as that is pretty much now a given.
The issue, imho, is what, if anything, our employer will do to offset the major reduction in net pay.
If it does nothing, it worsens both the attrition and recruitment problem to such an extent that an embarrassing number of aircraft would be grounded and the brand image would suffer massive negative publicity from the consequent, and forced, scaling back of services. If it does something, it would increase its costs way more than it would wish.
And, would the (remittance) tax apply to Provident Fund payout? If yes, it would certainly trigger the immediate departure of many (most?) of our more senior colleagues who will have a substantial amount invested and a correspondingly large amount to lose. Why risk getting exactly the same net payout from the Prov Fund (after tax) in 5 years time as you could get right now tax free?
The issue, imho, is what, if anything, our employer will do to offset the major reduction in net pay.
If it does nothing, it worsens both the attrition and recruitment problem to such an extent that an embarrassing number of aircraft would be grounded and the brand image would suffer massive negative publicity from the consequent, and forced, scaling back of services. If it does something, it would increase its costs way more than it would wish.
And, would the (remittance) tax apply to Provident Fund payout? If yes, it would certainly trigger the immediate departure of many (most?) of our more senior colleagues who will have a substantial amount invested and a correspondingly large amount to lose. Why risk getting exactly the same net payout from the Prov Fund (after tax) in 5 years time as you could get right now tax free?
Last edited by BANANASBANANAS; 29th Jan 2018 at 13:54.
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The concept of 'remittance' tax has been in the new several times over the last several years. It is also an easy tax to implement - Any financial institution simply applies it during a conversion, a defacto collection. Interestingly enough it was just over a year or so ago that the exchange houses began requiring passport/ID info for exchanges.
I would also guess that in the case of a remittance tax it will implemented with no notice to avoid large transfers that would occur if people knew it was coming.
I would also guess that in the case of a remittance tax it will implemented with no notice to avoid large transfers that would occur if people knew it was coming.
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Entirely agree.
So, in anticipation of the likely incoming bad news, can we expect expat house owners (with substantial equity), those with separate business interests and those with substantial cash held in UAE/GCC to immediately begin winding down their risk of exposure to these taxes?
I would say it is now time to have absolutely minimum assets in UAE/GCC.
So, in anticipation of the likely incoming bad news, can we expect expat house owners (with substantial equity), those with separate business interests and those with substantial cash held in UAE/GCC to immediately begin winding down their risk of exposure to these taxes?
I would say it is now time to have absolutely minimum assets in UAE/GCC.
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Yes, point taken. Perhaps it would have been better to have said, if you haven't already got your assets out of GCC, now is probably your very last chance without risking a hefty tax bill.
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Remittance tax would decimate the already weak housing market. As has been said there would be no point in staying if you have a large provident fund and property here. It would see a HUGE exodus of expats....me included.
If they want to kill the golden goose this would be the fastest way
If they want to kill the golden goose this would be the fastest way
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Income tax was supposed to be a temporary measure to pay for the Napoleonic wars.
Saudi Arabia tried to introduce an income tax but had to back off because of the numbers of threatened departures from expats. They kept income tax free, but made that subject to a minimum of one years service to save face.
Once a GST/VAT is in place it's permanent, the government become dependent on the revenue and the rate only ever goes up.
Saudi Arabia tried to introduce an income tax but had to back off because of the numbers of threatened departures from expats. They kept income tax free, but made that subject to a minimum of one years service to save face.
Once a GST/VAT is in place it's permanent, the government become dependent on the revenue and the rate only ever goes up.
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The combined effect of inflation, VAT and essentially what amounts to pilot wage freezes is taking its toll.
Since May 2013 (after a 0.5% pay rise that year) there has been no salary scale increase. Flying pay has gone up marginally giving a captain an extra AED 600 per month assuming an average of 75 hours.
Inflation based on government figures has gone up:
2.35% - 2014
4.07% - 2015
1.77% - 2016
2.07% - 2017
Compounded effect therefore 10.65%. This ignores several items that are not included but nonetheless feature in the inflation experienced by the average middle class worker in the UAE.
VAT has produced a consumer cost of approx 7% due to its cost of implementation and its application in many instances.
The effect of this on disposable income is obviously a lot higher. If disposable income was 18% of income 5 years ago then it is practically zero today. Even assuming an individual could save 50% of salary 5 years ago that has now been reduced by over a third.
If one looks at the cost of commodities and services and the salary scales of the last 20 years it becomes apparent that the salary of a first year FO has approximately doubled numerically but the purchase power has been halved.
Example: A first year FO earned approx AED 16,000 20 years ago. At the then price of gold (Approx 300 USD an ounce he/she could buy 14.5 ounces of gold with the salary. Today a first year FO will earn about AED 30,000 per month (Assuming he/she flies a full roster!) and that will buy them approx 6.1 ounces of gold at today's price. Most other commodities show a similar ratio.
Inflation is estimated to be 2.94% this year making any step we may get null and void. We would need a 7% adjustment to salary scales and a step increase in May to simply put us back to May 2016 when we got the last step.
I suspect that is unlikely.
Since May 2013 (after a 0.5% pay rise that year) there has been no salary scale increase. Flying pay has gone up marginally giving a captain an extra AED 600 per month assuming an average of 75 hours.
Inflation based on government figures has gone up:
2.35% - 2014
4.07% - 2015
1.77% - 2016
2.07% - 2017
Compounded effect therefore 10.65%. This ignores several items that are not included but nonetheless feature in the inflation experienced by the average middle class worker in the UAE.
VAT has produced a consumer cost of approx 7% due to its cost of implementation and its application in many instances.
The effect of this on disposable income is obviously a lot higher. If disposable income was 18% of income 5 years ago then it is practically zero today. Even assuming an individual could save 50% of salary 5 years ago that has now been reduced by over a third.
If one looks at the cost of commodities and services and the salary scales of the last 20 years it becomes apparent that the salary of a first year FO has approximately doubled numerically but the purchase power has been halved.
Example: A first year FO earned approx AED 16,000 20 years ago. At the then price of gold (Approx 300 USD an ounce he/she could buy 14.5 ounces of gold with the salary. Today a first year FO will earn about AED 30,000 per month (Assuming he/she flies a full roster!) and that will buy them approx 6.1 ounces of gold at today's price. Most other commodities show a similar ratio.
Inflation is estimated to be 2.94% this year making any step we may get null and void. We would need a 7% adjustment to salary scales and a step increase in May to simply put us back to May 2016 when we got the last step.
I suspect that is unlikely.
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Good points K9.
Main Fleet you are disregarding our low salaries compared to the West. So even if you pay 50% where you come from (highly unlikely) you are still better off and have a higher quality of life back home. As K9 pointed out even if we get a 25% pay raise (again highly unlikely) we are still behind we are just 4 years ago.
The exodus has already started. Just look at the planes at DWC.
Main Fleet you are disregarding our low salaries compared to the West. So even if you pay 50% where you come from (highly unlikely) you are still better off and have a higher quality of life back home. As K9 pointed out even if we get a 25% pay raise (again highly unlikely) we are still behind we are just 4 years ago.
The exodus has already started. Just look at the planes at DWC.
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Good post but slight correction. The OT threshold was reduced from 92-88 in 2015 and the 4.5% would need to be accounted for in analysis.
Anyone who joined after the summer of 2009 signed on for 92 OT thresh and have since seen it reduced to 88. Pre summer ‘09 - 78-92-88 on a 31 day month reduced by three hours for every day short of 31.
Anyone who joined after the summer of 2009 signed on for 92 OT thresh and have since seen it reduced to 88. Pre summer ‘09 - 78-92-88 on a 31 day month reduced by three hours for every day short of 31.
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Good points K9.
Main Fleet you are disregarding our low salaries compared to the West. So even if you pay 50% where you come from (highly unlikely) you are still better off and have a higher quality of life back home. As K9 pointed out even if we get a 25% pay raise (again highly unlikely) we are still behind we are just 4 years ago.
The exodus has already started. Just look at the planes at DWC.
Main Fleet you are disregarding our low salaries compared to the West. So even if you pay 50% where you come from (highly unlikely) you are still better off and have a higher quality of life back home. As K9 pointed out even if we get a 25% pay raise (again highly unlikely) we are still behind we are just 4 years ago.
The exodus has already started. Just look at the planes at DWC.
I agree with you on the QOL bit, but as an EASA licence holder...this simply does not apply!