Dubai – Mubasher: While most companies in the UAE will not take any specific measures to offset the impact of the value-added tax (VAT), the newly-levied tax will have a slight effect on people’s purchasing power, according to a report released by Mercer Consulting Company.
While applied to much of daily-purchased products, including food and clothing, the VAT is not imposed on additional spend items, such as financial services, education, and flights, Marsh & McLennan Companies’ unit added.
This means that a large segment of purchasing power will not be hurt by the VAT, the report highlighted.
“Lower salary households living on an income of AED 100,000 would typically spend 48.5% of their income on taxable goods and services, meaning a 2.4% loss in purchasing power,” Mercer’s data showed.
Meanwhile,”higher salaried single individuals with an income of AED 500,000 would only spend 37.7% of their pay on taxable goods and services, decreasing the impact of VAT on their purchasing power to only 1.5%”, the New York-based firm revealed.
The impact of the VAT is likely to be reversed by the expected growth in salaries, the company concluded.
