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Would direct taxes make Dubai more affordable?

would taxes make more sense in Dubai?

Alex Malouf opens the discussion of direct taxation in Dubai as opposed to shelling out cash for various needs.

May 5, 2013 1:37 by



The past month hasn’t pulled any punches when it comes to costs. There’s been the introduction of Salik for Sharjah-based residents and paid parking for employees based in the Tecom area. Rents are going up this year too, with reports of double-digit increases in some parts of the city. Then there’s been the revelation that some parents are paying up to 30 percent of their salaries on school fees. And if this makes you feel queasy you’ll now have to fork out Dh60 for a sick note.

For all of its wonders and its promise of a tax-free life, Dubai isn’t always a cheap place to live. And as there’s no taxation there’s no requirement for any services to be provided to most of us living here. For those of us fortunate people who have come from (usually) colder climes we often forget what our taxes paid for – infrastructure, social services and other meaningful things which I so often forget. We don’t pay taxes, we don’t receive services. Instead we pay for them based on wants and needs.

My question to you is has it come to a point where those in the Emirate would benefit more from a direct taxation system? It’d be clear and simple; you pay x and you get y. There’d be no additional charges on top unless the person wanted to put their child through a different school or go to a different hospital. Most of all, the beauty of direct taxation is that it is progressive and arguably fairer than a system whereby everybody pays the same no matter their level of income.

In effect, higher earners bear more of the tax burden based on their disposable income. The process is transparent and it’d take a significant burden off lower income employees who are disproportionately affected by all of the indirect fees lived on them.

The benefits could work both ways as Dubai would have a better estimate of what revenues could be spent on infrastructure projects and social welfare schemes. The elephant in the room on the taxation debate is civic rights. Normally, when you pay taxation there’s a certain expectation that you as a tax-payer should have in terms of how and where that money is spent and on the results.

Does direct taxation make sense? If it allows Dubai’s residents to have a clear idea of how much they’ll pay and the services that they’ll receive every month then yes it does. However, what would the implications be for the civic rights of the Emirate’s expatriates?

Taxation is normally considered to be a horrid issue, and one which every elected official the world over tries to avoid discussing. However, the debate may just be worth having if it makes living in Dubai more affordable for the majority of the people who work here and support the city’s existence. If taxation affords us all some transparency in terms of our outgoings and removes all those nitty, gritty costs that keep adding up whilst allowing for the development of good-quality schools and hospitals for expatriates then it may be the most sensible course of action. There may be a better alternative to Dubai’s tax-free living after all.

 

A British national with Arabic roots, Alex has spent ten years in the Gulf and has lived in Saudi Arabia, Bahrain, Lebanon, Jordan, Syria and the United Arab Emirates. Alex lost his heart to journalism years ago, but he has worked with a range of multinational companies in the technology, energy and financial sector to develop marketing and communications approach to the region. He’s currently based in Dubai but calls Bahrain home.



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4 Comments

  1. Sergio Feler on May 5, 2013 8:15 pm

    One of the wonders of the institutional system of the Emirates, is that it is moral and legitimate. This does it mean that there is equality before law. A progressive tax system is not, it seeks to use the law to try to generate equality. This, then, treats all citizens unequally depending on their individual income conditions.

    This dynamic creates a wholly unfair society, that through the years destroys economic incentives for production and development, as in almost all other countries in the world …

    Why do want to fix what is not broken? You don’t realize that you are creating an extraordinary success?

    if you want to improve people’s life quality… keep generating intelligent institutions for investment and savings.

    Sincerely,
    Sergio Horacio Feler

     
  2. Suresh Kabadkar on May 6, 2013 10:11 am

    No direct taxation system is fair and equitable anywhere in the world, including in the advanced countries. There is no way a citizen can determine the x tax paid against y benefits/services provided by the government. On the other hand, in many of these countries tax money is used by governments for unwarranted expenditure on needless wars, espionage, buying armaments etc, giving no or very little benefits to the tax paying citizens . I would actually let the present system in the Emirates to continue where we actually see how this money collected from the public is being used. I also agree : do not try to fix something which is not broken.

     
  3. Alex Malouf on May 6, 2013 11:05 am

    I’d argue that some of the most equitable societies in the world are those which promote proportionate direct taxation models, such as Scandinavia. I’ve lived here on a low-income back in the day (as a journalist) and I’d hate to think how I would cope now with all the indirect additional surcharges.

    At the end of the day, can we as people put the general well-being of the country and its residents ahead of our own concerns? I hope that for some the answer would be yes.

     
  4. Sergio Feler on May 6, 2013 7:08 pm

    Dear Alex,

    What is important, is not that we all have access to the same goods, but to look under what system the poor can get better opportunities. For some reason, millions of immigrants go there to seek for a better life …

    Sincerely,
    Sergio Feler

     

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