For a long time, the United Arab Emirates (UAE) had been stuck in the stereotype of an oil-based economy.
However, Dubai has worked deliberately over the years to assist the country to untangle itself and establish itself as a modern state through significant expenditures in innovation and technology.
Since then, the Gulf nation has been in the spotlight, implementing a series of reforms to align itself with the global community, the most recent of which is a federal corporate tax of 9%, which complies with the Organization for Economic Cooperation and Development’s international tax standards template (OECD).
Industry experts and financial analysts applaud the introduction of corporation tax, arguing that it will provide the UAE – the indisputable economic engine of the Middle East and North Africa (MENA) region – even more pressure to progressively reduce its reliance on traditional fossil-fuel revenue.
“I’ve heard that the corporate tax is a deterrent to investment. They don’t make any sense. Instead, I believe that the decision would considerably boost the UAE’s economy, as the country will become a fertile ground for well-intentioned businesses and corporate behemoths “According to K. V. Mohan Menon, a former UAE geopolitical and economic consultant.
Menon, a former investment banker who is now the chairman of Kerala-based SDF Industries Ltd, has lived and worked in several places, including the Gulf area. He claims that when Singapore, which was formerly a tax haven, adopted a 17 percent tax, everyone thought it was over.
“But, where is Singapore at the moment? So these end-of-the-world prophecies don’t ring true for me” Menon confesses.
Experts estimate that the UAE’s new corporate tax will bring in an additional $ 13 billion in revenue to the government coffers. Even so, Menon claims that it will have no detrimental impact on start-ups because only enterprises outside the free zones with profits over Dh.375,000 are subject to taxation.
As a result, the Gulf nation remains a desirable investment destination.
“However, rather than its tax and regulatory environment, Dubai’s ease of doing business culture will maintain it a magnet for investors for the foreseeable future,” Menon adds.
The UAE and Dubai are pragmatic and flexible in their approach, and they have always been the first to notice the writing on the wall, especially when it comes to diversifying their revenue streams away from hydrocarbons. “Whether it’s for IoT, Blockchain, or AI, Dubai has taken an early and fascinating lead in portraying itself as an innovation centre,” Menon adds.
In other words, in the long run, the country will only be home to those businesses that, while working for profit, do not forget or neglect their social responsibilities, contributing to the UAE’s economic and global status by making meaningful contributions and adhering to globally accepted best practices and norms.
That is what Menon and others argue.
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