Saudi Arabia and the United Arab Emirates, which have long lured foreign workers with the promise of a tax-free lifestyle, plan to impose a 5 per cent tax in 2018 on most goods and services to boost revenue after oil prices collapsed since 2014.
The value-added tax, or VAT, will apply to a range of items like food, clothes, electronics and gasoline, as well as phone, water and electricity bills, and hotel reservations.
Elda Ngombe, a 23-year-old college graduate who’s looking for a job in Dubai, said there’s one specific purchase she’s planning before 2018’s price hike: “Makeup, because I can’t live without makeup.”
“I am scared because everything is actually expensive already in Dubai. The fact that it’s actually adding 5 per cent is crazy,” she said.
There will be some exemptions for big-ticket costs like rent, real estate sales, certain medications, airline tickets and school tuition.
Higher education, however, will be taxed in the UAE. Extra costs parents pay to schools for uniforms, books, school bus fees and lunch will also be taxed, as will real estate brokerage costs for renters and buyers.
Other Gulf countries are expected to implement their own VAT scheme in the coming years.
