The Ministry of Economy said that the value-added tax (VAT) has positively impacted the state budget and expects its positive impact on the UAE economy to increase in the coming years.
The Ministry of Economy said in a new study issued today on the impact of VAT on the national economy that the value-added tax is expected to benefit the economy in the future as the inflationary impact of the tax will fade and the exploitation of the revenues derived from VAT in government investment spending will stimulate growth. Economic.
The ministry explained that the tax contributed to the achievement of the state budget a surplus of 2.2% of GDP last year.
Tax revenues, of which VAT is a part, amounted to only 5.5% of the total state revenues last year, while oil revenues and profits of joint-stock companies accounted for 36.1% and 32.9% respectively of the total state revenues.
The report pointed out that the inflationary impact of the tax is completely temporary after the VAT contributed to increase the overall level of prices, where the inflation rate rose from 2% in 2017 to 3.1% in 2018, which is due to the relative rise in oil prices as well, not just tax.
The report pointed out that the value added tax (VAT) had a slight impact on consumer and investment spending of the private sector, where consumer spending at constant prices decreased by 0.5% in 2018, compared to an increase of 0.9% and 1.6% in 2017 and 2016 respectively, and investment spending on fixed prices declined. By 0.7% in 2018, after also declining by 12.8% in 2017