Indirect taxes in the UAE have emerged as a significant revenue stream, generating AED 10 to 11 billion ($2.7 to $3 billion) annually, according to His Excellency Younis Haji Al Khoori, Undersecretary of the Ministry of Finance. This figure constitutes a crucial portion of the UAE’s federal budget, which stands at approximately AED 65 billion.
Speaking at the Federal Tax Authority’s second annual strategic partners forum on Thursday, Al Khoori underscored the pivotal role of indirect tax revenues in strengthening the country’s economic framework and enhancing the financial stability of the federal government.
Supporting Economic Growth and Diversification
In his remarks, Al Khoori highlighted that these tax revenues are integral to bolstering the UAE’s economy and achieving long-term financial sustainability. He stated:
“This underscores the robustness of the UAE’s tax framework, which is aligned with its strategic vision of achieving economic diversification and financial sustainability.”
The UAE’s indirect tax system, which includes value-added tax (VAT) and excise tax, has proven instrumental in reducing reliance on oil revenues. Introduced in 2018, VAT is levied at a standard rate of 5%, while excise taxes target specific goods like tobacco, sugary drinks, and energy drinks to encourage healthier consumption patterns.
Federal Budget Allocation
The annual tax revenue of AED 10 to 11 billion contributes significantly to the federal budget, which supports key sectors such as healthcare, education, and infrastructure development. These funds are also used to promote innovation and drive initiatives that align with the UAE’s strategic priorities, including its ambition to become a global leader in economic diversification.
Collaboration with Strategic Partners
The strategic partners forum organized by the Federal Tax Authority brings together stakeholders from various sectors to ensure a transparent and effective tax framework. Discussions at the forum centered on enhancing compliance, streamlining processes, and fostering greater collaboration between the government and private sector entities.
Strengthening Financial Stability
The UAE’s efforts to establish a robust tax system reflect its commitment to building a resilient economy that is less dependent on traditional revenue sources. Indirect tax revenues provide a sustainable financial base for the federal government, ensuring the UAE’s fiscal policies remain aligned with its long-term vision for growth and stability.
