Dubai was the largest beneficiary among the seven emirates in value-added tax (VAT) collection last year, receiving 42 percent or Dh11.34 billion of the Dh27 billion total, Moody's Investors Service said.
Data from the global rating agency showed that the federal government will retain 30 percent, or Dh8.1 billion, of the collected revenues while the remaining Dh18.9 billion, or 70 percent, will be divided among the emirates.
After Dubai and the federal government, Abu Dhabi will receive 18 percent (Dh4.85 billion). Sharjah will get 6 percent (Dh1.61 billion) and the Northern Emirates will receive 4 percent (Dh1.1 billion).
The UAE levied 5 percent VAT on selected goods and services from January 1, 2018, in order to boost revenues and diversify the economy away from hydrocarbon dependence. The Federal Tax Authority collected Dh27 billion in VAT revenues in 2018, surpassing its 2018 target of Dh12 billion and even the 2019 target of Dh20 billion.
Thaddeus Best, the analyst at Moody's Investors Service, said the UAE surpassing its 2018 VAT collection target by 125 percent is credit-positive for the country.
He said that although the standing populations of Dubai and Abu Dhabi are fairly similar, Dubai benefits from a much higher tourism spending and a higher daytime population as workers commute in from other emirates. The additional VAT receipts should help offset some of the losses to government revenues from the reduction in service fees that the government of Dubai recently implemented as part of its efforts to stimulate the economy in the face of decelerating non-oil real GDP growth.
Naveen Sharma, head of the Accounting, Audit & Advisory Services Focus Group at the Indian Business and Professional Council Dubai, said VAT collection will increase for the current year as well due to a high compliance ratio and increased spending for Expo 2020.b