The UAE has denied any plans to increase Value-Added Tax (VAT) in the country. In a statement released on Monday, the Ministry of Finance confirmed that the VAT rate will continue to stand at five per cent. Officials added that they are committed to achieving their development goals and plans, which had been previously approved by the government. The clarification comes after Saudi Arabia announced its decision to triple its VAT rate from July.
Saudi Arabia has tripled its VAT (value added tax) rate and suspended a cost of living allowance for state employees, thus, seeking to shore up finances hit hard by low oil prices and a coronavirus-driven slowdown.
"The cost of living allowance will be suspended as of June 1, and the value added tax will be increased to 15 per cent from 5 per cent as of July 1," Finance Minister Mohammed al-Jadaan said in the statement. "These measures are painful but necessary to maintain financial and economic stability over the medium to long term...and to overcome the unprecedented coronavirus crisis with the least damage possible."
In 2018, Saudi Arabia's King Salman ordered a monthly payment of 1,000 riyals ($267) to every state employee to compensate them the rising cost of living after the government hiked domestic gas prices and introduced value-added tax. About 1.5 million Saudis are employed in the government sector.