Global tax or not, the United Arab Emirates wants to remain an economic magnet

(Dubai) Gigantic brand new skyscrapers and promises of luxurious living attract expats and multinationals to the United Arab Emirates. Whether or not it agrees to a potential corporate tax consensus, this glitzy Gulf tax haven will retain its appeal, experts say.

Posted on June 13, 2021

Aziz EL MASASSI
Media Agency France

On June 5, in London, the finance ministers of the seven largest powers (G7) announced an “unprecedented” agreement on a global minimum tax and a better distribution of tax revenues from multinational companies, led by digital giants.

Target: a global corporate tax rate of “at least 15%”. In the crosshairs of the G7, the tax havens that primarily attract the famous American Gafa (Google, Amazon, Facebook, Apple).

According to the Organization for Economic Co-operation and Development (OECD), which brings together the most developed countries, a tax haven is characterized by “non-existent or insignificant taxes”. This applies to the Emirates, but also to Jersey, the Bahamas, the Cayman Islands and Bahrain.

Abu Dhabi, the capital of the Emirates, and in particular Dubai, the most popular of the six other principalities that make up this federation, are thus home to the regional offices of thousands of companies. The Emirati authorities have not officially responded to the G7 agreement or to inquiries from AFP.

But this week the Dubai government announced a series of policies “aimed at reducing the cost of doing business and boosting economic growth”.

These measures, to be implemented “in the next three months,” are intended to “consolidate Dubai’s status as a global investment and business destination,” the emirate’s leadership readily stressed.

“Limited Services”

In the midst of the COVID-19 pandemic, the Emirates had already launched reforms. Since 1ah As a result, foreigners can set up a company and hold all the capital (up from 49% previously), which was previously only possible in certain free zones.

This reform “aims to strengthen competitive advantage” and “make it easier to do business,” according to Abdallah ben Touq Al-Mari, the association’s economy minister, already in 16th placeand in the World Bank’s “Ease of Doing Business” ranking.

But this state, which is banking on its international brand image, will certainly try to “be seen as part of the global system and not as a tax haven,” said Scott Livermore, chief economist at Oxford Economics Middle East, based in Dubai.

“Staying out of the deal will have limited benefits, especially if it is approved by the G20 and the OECD,” he told AFP.

And in his opinion, even in the event of an increase in the tax burden on companies, the government will compensate, following the example of Luxembourg and Malta, where corporate tax is equipped with several exemptions.

“The authorities already understand the importance of a more open economic and social environment in order to attract and retain foreign investment and talent,” emphasizes Scott Livermore, noting in particular the relaxation of various administrative procedures, particularly for visas.

“Creativity”

The way of life draws foreign executives to Abu Dhabi and specifically to Dubai, an airport hub and ultra-connected city where a legion of poor workers from the Indian subcontinent aspire to provide all possible services.

The Emirates’ meager taxation, if any, is admittedly “an important carrot to be waved to foreign investors”, but “even with the potential impact of a minimal global corporate tax, they will remain a relatively low tax environment,” agrees Robert Mogielnicki of the Arab Gulf States Institute think tank in Washington.

“Policymakers in the Emirates need to be creative and consider restructuring various business-related costs,” the researcher predicts to AFP, believing the country will remain a “competitive business hub.”

“The business environment in the Emirates benefits from excellent connections to the main global markets, a high standard of living and a dynamic labor market with a qualified and profitable foreign workforce,” he explains.

And with falling oil revenues, “the general fiscal trend in recent years in the Gulf has been to raise taxes, not lower them.”

“In the long term, the UAE government and its citizens will not really regret any company or investor interested only in preferential tax treatment,” the researcher notes.

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