New fees in Dubai dilute benefits of tax exemptions

New fees in Dubai dilute benefits of tax exemptions
By Ahmed A. Elewa, Staff Reporter/GULF NEWS Published: July 24, 2007, 23:05

Abu Dhabi: The advantage of tax exemptions in the UAE is being diluted by the many fees imposed on businesses, especially in Dubai, an economic expert said.

Dubai is seeking to multiply its visitors, capitalising on shopping promotions and events such as the ongoing Dubai Summer Surprises and the Dubai Shopping Festival.

However, the emirate risks major retail price hikes compared to other places in the region. The new fees have a multiplier effect not only on retail prices, but on the overall inflation rate.

"Although there are no taxes in Dubai there are many other hidden growing costs, such as the new municipality fee on property, health care, in addition to the Salik toll," said Eckart Woertz, economist at the Gulf Research Centre.

Many other services are witnessing substantial cost increases, including education and warehousing.

"Such additional costs put more pressure on consumers, and with the possibility of a value added tax (VAT) being introduced, the situation can further deteriorate," he added.

Expensive foodstuffs

Dubai's high foodstuff prices could adversely affect the emirate's endeavours to promote itself as a shopping destination.

Therefore, there must be careful consideration before introducing new fees, especially at a time when inflation is soaring as a result of robust economic growth.

"Dubai imports foodstuffs from countries like Europe, Canada and Australia, whose currencies have appreciated substantially against the dollar, hence adding the impact of imported inflation to impacts of domestic origin," Woertz said.