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UAE toys with taxes

UAE toys with taxes

Dubai’s debt headache is putting pressure on the country’s tax-free philosophy. But a tax levy could drive out expats and businesses, and could even destabilise the UAE's political balance.

September 9, 2010 1:15 by

Residents say the government has increased enforcement of rental housing taxes and police have stepped up speed traps on the roads. Dubai has deployed 50 patrol cars to catch traffic offenders and cars with expired registrations.

Shaheen Shahani, owner of the Shampooch mobile pet grooming business, said she would pull out if taxes were introduced.
“Tax-free living and working was why I set up my business here, and that is the main reason why people moved to Dubai,” said Shahani, who drives around in a pink van to offer showering and styling services to dogs and cats.

For now, the main source of fresh capital is expected to come through asset sales and debt issuance. Dubai’s biggest debtor Dubai World is eyeing the sale of prized assets of up to $19.4 billion to repay creditors.

Moving too fast to introduce outright corporate, personal income or value-added taxes could also destabilise the political balance among the seven emirates, as a proposal by one would have to be adopted by all, according to current laws.

“If a business had set up in a free trade zone and had qualified for a tax holiday and then those tax holidays were withdrawn, potentially this could have an impact on the sovereign (political) risk profile of the UAE,” said Dean Rolfe, a tax specialist at PricewaterhouseCoopers in Dubai.

(By Martina Fuchs. Editing by Susan Fenton)

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