Home / NEWS / Revealed: 2018 VAT unlikely to hurt GCC employers

Revealed: 2018 VAT unlikely to hurt GCC employers

by Neha Bhatia on Mar 2, 2016

VAT will only have a
VAT will only have a "minimal" effect on GCC employers. [Image: Al Arabiya]

The introduction of a region-wide value added tax (VAT) policy, confirmed by UAE officials late last month, is unlikely to damage the GCC's skills market. 

In February, the UAE’s Minister of State for Financial Affairs confirmed the country would partake in the GCC-wide initiative to introduce VAT on certain goods and services by 2019.

The UAE is reportedly set to implement 5% VAT from 1 January, 2018, with 150 food items, health, and education exempted, Obaid Humaid Al Tayer, said.

However, this tax, while likely to alter the supply chain dynamics of GCC's construction sector, will only have a "minimal" impact on employers looking to hire talent from outside the region. 

"Most skilled workers from abroad will have grown up paying income tax and VAT on goods," Niall Hughes, senior consultant for construction at human resources consultancy, Morgan McKinley, told Construction Week.

"Whilst the 'no tax' policy has played a big part in attracting people to work in the region, a small VAT levy will have much less of an impact in attracting people to move here than a levy on income tax would.

"Ultimately, people would prefer to pay no taxes. However, the financial benefits [of working in the GCC], along with the lifestyle on offer, should ensure that motivated and skilled workers still see the UAE and GCC region as an attractive place to move to.

"Therefore, the effect on attracting people to the region should be minimal," Hughes added. 

Al Tayer said that a GCC resolution covering the tax will come into effect in 2018, but countries will have until 1 January, 2019, to implement VAT.

“There’s a span of one year flexibility given the readiness of each country,” he said, according to Arabian Business, adding each country will have the flexibility to introduce VAT within this timeframe.