As covered in today's gulf news, VAT will be 5% and applicable to all goods and services sold in UAE. The revenues collected will be a replacement for the duty collected now on goods and services imported. Most of the countries exporting to UAE will have a free trade agreement with UAE by the end of this year.
This is good news for the financial system of UAE. And, unlike what most people who are against the VAT think, the VAT system will be a replacement for the duty system(which charges 5% right now), and should not raise the prices beyond the current inflation levels. However, considering that the present inflation is towards the high levels, most of the blame will go towards any new taxation system introducted.
One should keep in mind that VAT is not an income tax, and Salary will continue to be tax-free, unlike rest of the world.
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