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The tax benefits associated with living in luxury have long attracted foreigners and multinationals to the UAE, which aims to remain attractive whether or not they join a global tax initiative.
The wealthy powers of the Group of Seven this month approved an “unprecedented” deal on a global minimum corporate tax targeting large companies seen as underpaying, especially tech giants.
The goal is a minimum tax of at least 15 percent.
While the deal is the first step in a long process before it becomes reality, the crosshairs are tax havens that attract companies like Amazon, Apple, Google and Facebook.
The UAE first entered the world’s top 10 tax havens in March, according to the Tax Justice Network.
Modestly referred to as “jurisdictions without insignificant taxes or fees” by the Organization for Economic Co-operation and Development (OECD), havens include the Bahamas, British Virgin Islands, Guernsey, Jersey, United Arab Emirates and many more.
Abu Dhabi, the capital of the United Arab Emirates, and freewheeling Dubai, the biggest draw for investors in the seven emirates of the United Arab Emirates, is home to thousands of companies that have set up regional offices there.
UAE officials have yet to release a statement on the G7 deal and have not responded to an AFP request for comment.
But this week, Dubai announced plans to reduce government procedures over the next few months as part of efforts to lower the cost of doing business and further boost economic growth in the emirate.
– ‘Consolidate and simplify’ –
Hard hit by the coronavirus pandemic, the United Arab Emirates has already launched a series of reforms, notably to allow foreigners full ownership of businesses, whereas previously it was capped at 49% unless it was based in certain areas frank.
Economy Minister Abdulla bin Touq Al Marri said the changes were aimed at strengthening the country’s “competitive advantage”, currently 16th in the World Bank’s ranking on ease of doing business.
The UAE, which relies on its image as an international hub, “will want to be seen as part of the global system rather than a tax haven,” said Scott Livermore of Oxford Economics Middle East.
“The benefits of staying out of the deal are limited, especially if it is approved by G20 and OECD countries,” the Dubai-based economist told AFP.
According to Livermore, even if the country’s businesses saw an increase in the tax burden, the government was likely to “consolidate and simplify the fees”, as is the case in Luxembourg and Malta, where multiple exemptions significantly reduce the bill. final.
“The authorities have already realized the importance of a broader business and social environment to attract and retain foreign investment and talent,” he said.
“This has been demonstrated by the series of visa and business reforms announced over the past year.”
– ‘To show creativity’ –
Many foreign executives are attracted to the Abu Dhabi and especially Dubai way of life.
The two emirates are air hubs and offer a variety of luxury services that depend on a migrant workforce largely from South Asian countries.
The UAE’s weak tax regime has been a “major carrot to hang” for foreign investors, said Robert Mogielnicki, senior resident researcher at the Arab Gulf States Institute in Washington.
“Emirati policymakers will need to be creative and consider restructuring various business costs,” he told AFP.
“But even with the expected impact of a global minimum corporate tax, the UAE will remain a relatively low tax environment.”
And regardless of new taxes introduced in Gulf countries in recent years amid an economic slowdown due to falling oil prices, Mogielnicki believes the Emirates will remain competitive.
âThe UAE’s business environment benefits from excellent connectivity with major global markets, a high standard of living and a vibrant labor market with a skilled and profitable expatriate workforce,â said he declared.
“I don’t think the UAE government or its citizens will be truly missed by companies or investors who only care about preferential tax treatment in the long term – although missing out on some business opportunities will be painful in the short term.”
Â© 2021 AFP