Economy
Dubai Customs vs. IMF?
Dubai Customs not thrilled with IMF’s Mohsen Khan
Mr. Mohsin Khan seems to be upsetting Dubai Customs with statements about VAT causing a 2% inflation in the UAE. Dubai Customs’ Al Saleh rebuffed Khan’s statement, citing that they are personal observations and do not reflect the IMF’s report. Considering that the IMF report hardly touches on VAT, I’m not sure what Mr. Al Saleh’s problem is.
I’m not sure what is surprising about the VAT being an inflationary addition to the economy. If the cost of goods and services increases, it is inflationary. Yesterday I paid AED 100/- for X goods, tomorrow I’ll pay AED 103/-.
Al Saleh’s statements are your typical Arab government official rhetoric. Al Saleh says:
The evidence, however, suggests that there is no reason to expect that VAT would be inflationary, although the VAT may have a one-time effect on the general price level and may lead to a change in relative prices.
It is well-known globally that implementing VAT in many countries has significantly contributed in boosting the economy’s sustainability, as VAT is considered the ideal tax for already strong economies.
And what evidence is that? So let me get this straight: VAT is not inflationary, because it will increase prices once and for all?
While I am not disputing that VAT is a good thing for the economy, I find Mr. Al Saleh’s statements troubling. Either he is not sure what inflation means, or he thinks we are all idiots. Either way it is not good.
Inflation is a rise in general level of prices of goods and services over time — Wikipedia
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did a post about this on my blog:
http://some-like-it-not.blogspot.com/2008/05/vat-load-of-bollocks.html
the real nick,
No reason to get that upset. I find Al Saleh’s comments insulting as well.
So yes, of course VAT will increase the standard of living - that’s the living standards of importers of goods, traders and self-employed businesses who’ll pass on the 5% ++ buck to the public.
I doubt that this is the case. The VAT affects everyone at every level. Eventually, people will have to be more competitive and will not be able to simply pass on the increased cost to consumers. Take for instance, B2B services. It is virtually impossible to pass on rising prices to them.
Trust me on this one!