The Introduction of Tax in UAE will have an Impact on the Salaries | Push Digits Chartered Accountants

The Introduction of Tax in UAE will have an Impact on the Salaries

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The rumor mill of UAE has been targeting to open up the tax records in the past few weeks. The main aim is to set up tax on corporations and purchased products. It is primarily a sales tax, and the feared scenario of the income tax is not yet up for the time being. The sister newspapers of the UAE, the Al Ittihad, has reported that the federal government has been planning to introduce corporation tax and VAT.

With the introduction of taxes, the question is, how will this affect our salaries and monthly payments? Well, the answer to that depends on factors, such as where and how the taxes will be applied and what the overall rate of the taxes are.

The introduction of the corporate taxes will be more challenging and more on a long-term basis, but the returns from these will decrease anyway, because the government will take away a part of these shares in the form of taxes. Usually, when shareholders notice a decrease in the margins, they typically manage a way to improve them and increase them again, but because of the current tax situation, not only the shareholders, but the employees and the consumers will greatly be affected by this as well.

However, since the salaries are a huge part of the expenses of most of the organizations, the yearly increases in the salaries will soon be brought back to their normal rates. To help in this, there may be a rise in the market value of the services and goods so that the companies can manage to pay the salaries as before. The corporation taxes, therefore, will not only have a negative effect, but the effect will last for a long time and continue to keep the pockets of the ordinary citizens light.

The sales tax will also have a severe effect on us, as the introduction of sales tax means that the price of everything, starting from technological devices to vegetables will rise up overnight. This would mean that the extra value of money will be added to the original cost of the product so that the suppliers and the retailers don’t go bankrupt over their businesses.

With all the changes in the cost of goods and purchases, we are left with the question of whether all these increases on the prices of all our daily necessities will also lead to an increase in the salary of our jobs. The answer to this also depends on various other factors, but the plain and the simpler one perhaps, is most probably a negative one.

All the mysteries about whether the rise in taxes will cause a rise in the annual pay can be answered correctly only after taking several other factors, like the introduction, the rate, and the application of the taxes into consideration.


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