Expats in the United Arab Emirates (UAE) can breathe a sigh of relief as the government has confirmed income tax for individuals is off the agenda – for the time being.
Thousands of expats flock to Dubai and Abu Dhabi to pick up tax-free salaries and generous termination bonuses. Speculation was rife that the government was considering introducing income tax to raise revenue.
However, Sheikh Hamdan Bin Rashid Al Maktoum, Dubai’s deputy ruler and Minister of Finance has confirmed without reservation that the nation has ‘no immediate plans’ to tax salaries.
He did not rule out business and corporation taxes, raising duties on tobacco and some services offered by federal ministries and organisations.
Remittance restrictions
“The ministry is committed to announcing any taxes once an agreement is reached with relevant and concerned parties,” he said.
“One area we are looking at is the impact of imposing a fee on remittances sent abroad. If imposed, the ministry will review proposals regarding the mechanism on how to collect such fees.”
Other Gulf State countries, like Saudi Arabia, already have restrictions on expat workers sending their salaries overseas.
The concern is money earned and currency is not spent in Saudi Arabia or the UAE but is sent elsewhere to bolster foreign economies.
This mainly affects workers from Asian countries like India, Pakistan and the Philippines. Official figures for Pakistan alone reveal £6 billion was received from expat workers last year, while the country holds a massive £1,564 million in remittances from Saudi Arabia and the UAE alone.
The Shiekh’s statements were made when he delivered the UAE budget.
Budget spending
The 2014-16 budget is up 15% from 2011-13 at £22.95 billion. The hike is partly due to the infrastructure costs relating to Expo 2020.
Projects for housing, electricity and water will cost £2.2 billion, while £300 million has been set aside for health care. Ministries have £1.7 billion to spend out of a federal budget of £3.9 billion.
Total government spending will hit £7.57 billion. The budget also revealed that UAE revenue and expenses balanced and showed no deficit from last year.
Sheikh Hamdan said the increased budget reflects the growth of the UAE’s economy and prospects for further expansion.
“The aim is to enhance the welfare and prosperity of Emiratis by improving government services, maintaining of security and safety, better education, expanding healthcare, providing good living conditions for pensioned federal workers,” said the minister.
