December 1, 2017

94% of Dubai Population Expect Living Costs to Hike Due to VAT- Addaera Survey

About 94% of Dubai population expect living costs to hike following the Value Added Tax (VAT) introduction in the UAE, a new survey by Addaera Research & Polls Centre revealed.

The recent study explored three main aspects of research that included measuring the level of awareness about VAT in Dubai, to what extent people perceive it as a positive economic procedure and the potential reactions that taxpayers may take in response.

Hana Lootah, CEO of Addaera Research & Polls Centre, said the study aimed to look at the public opinion about a new economic procedure that will take place in the country, which until recently was tax free, and would consequently affect people’s socio-economic aspects of life.

“The study detected common concerns about the increase of living costs among the majority of respondents regardless of their nationality, income or employment. A significant tendency to cut expenses to adapt to the upcoming conditions was identified; reflecting a potential dampening effect on the purchasing power. VAT introduction may also have a negative impact on the UAE’s global position as one of the best destinations to live in with two third of residents revealed they will reconsider their stay in the country after VAT,” Lootah explained.
Key findings from the survey indicated that 94.2% of pollers believed that VAT will push living costs upward in the UAE. Meanwhile, 69.2% said their purchasing habits will change.

68.7% of residents said they will reconsider their decision to continue living in the UAE after the tax application. In regard to whether the VAT is seen as a positive step aiming to boost the UAE’s economy, 70% of respondents expressed their disagreement on tax as a beneficial economic procedure.

On the other hand, 71.2% of respondents turned to be familiar with the VAT, and 82% were aware about UAE’s plan to introduce the tax in later stage. 83.3% recognized that 2018 is the year of introduction, and 46.2% were informed that VAT is an indirect tax.

Surveying the knowledge about VAT’s percentage and calculation, 69.5% had correct information that the tax will be applied at 5%, while 61% were familiar with retail price setting mechanisms.

Awareness level about taxed and exempted goods and services was clearly low, as 25.6% of respondents knew that VAT will not be imposed on all goods and services, among-whom only 8.5% were aware that education, health services and 100 basic food commodities will be exempted.

The most affected goods, according to respondents, were food at 36.9%, clothes 11.7%, luxury products 11.7%, electronics 10.4%, vehicles and transportation 8%, rents 3.8% and tobacco 3.2%.
The survey looked into the public awareness on official bodies taking the responsibility of VAT implementation and collection. 34.1% of respondents were correctly informed that the tax will be managed by the UAE’s Federal Tax Authority.

Addaera’s survey targeted a stratified random sample of multiple and different income and consumption categories. 1165 respondents participated in the study which included three sections of 22 questions. The sample was composed of 70% males and 30% females and was designed according to rates of spending and consumption as per nationality, gender, income and employment status. Dubai population represented 89.7% of total respondents with 45.7% Asians, 24.7% Emiratis, 16.6% Arabs and 13% Europeans and Americans.