Plans to implement value added tax (VAT) in the UAE, expected to be introduced at a rate of 5% in 2018, have not given me much cause for concern as a consumer.
Healthcare and education will be excluded, along with 100 other items, and it’s an indirect taxation; one I assume I will learn to absorb in my monthly budgets, just as I have done previously when the likes of housing fees and Salik were introduced. To be honest, it’s not something I have given much thought.
In the content of the hotel business, it’s rather more consequential and yet, there has been very little written or said about the issue. That is until the recent Arabian Hotel Investment Conference in Dubai, when Marriott International president and managing director, Middle East & Africa, Alex Kyriakidis, confronted the elephant in the room.
In a conference that addressed the macroeconomic situation and analysed the impact in the Middle East and elsewhere of the decline in oil revenues, it was logical that VAT would be discussed, but Kyriakidis was surprisingly vocal on the matter.
Acknowledging the need for governments to look at alternative sources of revenue given budget deficits as a result of receding oil prices, Kyriakidis warned that the introduction of VAT to the travel and tourism industry needed to be very carefully considered.
If not, his concern was that it could hamper demand for the mid-market hotel sector in the UAE.
A Hotel already has to add a 10% service change and a 10% municipality fee to their room rate; serviced apartments also have a “room tax” of AED 15 (US $4.08) or AED 20 ($5.45) per day for four- and five-star properties respectively. Kyriakidis said these fees “stack up”, and impact consumer perception of the price of Dubai.