BUSINESS news

Thursday, May 14, 2009
VAT plans put on hold.

Dubai: The UAE appears to have abandoned plans to implement value-added tax (VAT) for the time being, a top official said, adding that the worst for Dubai is over.

The government is going to enact a new Investment Law and revise the Companies Law in the next six months. The Investment Law will change the country's foreign investment regime and allow more than 49 per cent foreign ownership in companies in certain sectors outside free zone areas.

"The government is currently working on a number of laws and regulations that will reduce procedures and lower licensing and business registration costs and make Dubai a more competitive place to work and live in," Hamad Bu Amim, Director-General of Dubai Chamber of Commerce and Industry, told Gulf News in an exclusive interview.

"The worst for us is over. So plans like VAT are definitely off the government's agenda, as the government is currently working on a comprehensive set of rules and regulations that will make our economy more competitive and ease doing business," he said.

The UAE Government had planned to introduce VAT in phases from later this year or early 2010. The tax was to start at three per cent and replace the five per cent import duty.

The plan, in line with a Gulf-wide implementation, had met with resistance, especially in view of the current economic situation.

The six Gulf states created a Customs Union in 2003 and a Common Market in 2008, in line with creating a Monetary Union by 2010 - a deadline currently in doubt.

"The government is working on a new Investment Law, which could be announced in the second half of the year, and looking at reducing the number of licensing and business registration procedures by a third from 21," Bu Amim said.

Currently, it takes about two years and 50 procedures to enforce a contract. The UAE ranks 144 among 178 economies in business competitiveness.

The government is also revising the Commercial Companies Law and the Commercial Agencies Law, and re-introducing the Bankruptcy Law and bringing them in line with international best practices.

The Bankruptcy Law, which is expected to suggest ways to protect businesses from creditors during difficult economic periods, will help businesses to continue instead of facing legal proceedings.

The UAE, especially Dubai, witnessed a boom for five years that was fuelled by real estate, construction sector and high oil prices, till things began to change late last year.

A massive capital outflow then impacted the country's economy, eliminating speculators from the market, which is currently in a clean-up mode.

The moves, Bu Amim said, come in line with the UAE strategy to streamline processes to boost government's performance and investor confidence.



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