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What is monitored is done. The greatest failure of this maxim is not that the task is not completed, but that anything in the required protocol that is deemed inconvenient is discarded.
Today, those of us working in the corporate tax world are trying to understand the impact it will have on various industries. Having experienced the implementation of VAT, I was very aware of the scale of the task.
It takes years for any of us to feel confident enough to sit down and give advice comfortably.
For most business owners, the time for an apparently casual relationship with the corporate tax framework is likely to come sooner.
Whether it’s human nature that subconsciously leads them to believe it’s all a fuss in a teacup, or inevitable distractions that cause them to refocus their energy elsewhere, many people lose interest.
The fact that reporting is an annual task only creates a sense of complacency. While most companies’ fiscal years run from January to December, many companies have different combinations of months. This means there’s always a chance you know someone who files an annual corporate tax return.
Its closest regulatory relative, the value-added tax, is almost universally conducted on a quarterly basis. But VAT shows us why some business owners might give up on corporation tax.
Let’s see how these slippery slopes manifest themselves.
UAE law states that the price shown is the price paid. This means that if an item is listed on the menu as priced at AED 100, you will have to pay AED 100. Nothing can be added to it.
You may notice various additional information at the bottom of the service or product menu: municipal fees, service charges, VAT. Everything is normal. All included.
That’s unlike the U.S., where massive federal, state and local taxes quickly raise prices for consumers. It can leave a sour taste on unwary customers.
It doesn’t even make sense given that all sellers of goods and services pay the same fees. There is no competitive advantage.
Therefore, the UAE authorities took their view. The price you see is the price you pay. Provide customers with certainty. Bravo, UAE.
Twice in the past 12 months I have been charged VAT on top of the clearly printed price of goods supplied to me. Both times I questioned the seller. Proving that I was an expert didn’t bother them. I was charged extra.
Although Khalid Ali Al Bustani, director of the Federal Tax Service, confirmed the regulation last year, it was not enough to prevent last-minute unannounced price changes.
Mr Al Bustani even highlighted the penalty for adding VAT to the displayed price.
In this situation, few can provide consumers with the services to make authoritative decisions quickly. They will usually stand looking unhappily at their shoes or through you, hoping that you will either pay or go away.
It’s our responsibility as customers to be reasonable here. What do you want a clueless sales rep to do?
I just let it go. Ultimately, I felt guilty for not wanting to cause a fuss. However, my misfortune today may be yours tomorrow.
The worst part of my experience was being told that many other businesses followed this practice. Sadly, I think they are telling the truth. VAT was introduced five years ago.
What might be similar experiences in corporate tax?
The reason for this slippery slope may not be a broad interpretation of allowable expenses, but rather a broad interpretation of the documentation required to prove that expenses have been correctly deducted from taxable profits.
Waiting to monitor these entities will be fully empowered and knowledgeable inspection teams, not today, tomorrow, or maybe even a year from now.
At that point, the specific nuances of treatment will become clear. My reticence will not reflect on these people.
During the festive season, don’t forget to conduct business in a compliant manner – today, tomorrow and next year.
David Daly is a partner at Gulf Tax Accounting Group in the Emirates
Update time: 4:39 am on December 11, 2023
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