The secret of change is to focus all of your energy, not on fighting the old, but on building the new.

-        Socrates  

The introduction of VAT or Value Added Tax in the UAE is no more a news. All of us are aware of it and in the phase of being VAT ready; reviewing our IT capabilities, identifying key areas, pricing policies, training our staff members, restructuring our business operations and processes. If not, then it’s high time that you should engage in checking on your VAT preparedness.

VAT is the simplest form of indirect tax levied on consumers. It’s a consumption tax charged at each step of the supply chain which is borne by the consumers while the businesses keep the account and collect it on behalf of the government. In terms of consumers, the expected tax rate is 5% with exemptions on many essentials items which may not be a major dent on consumers’ pocket and for businesses, availability of the knowledge sharing, technical know-how and ample transition time raises the comfort level to adapt to the working environment. Last year the government of UAE also formed a Federal Tax Authority to ensure a smooth transition and for the ease of business owners. Above all, we understand that the implementation of VAT is going to strengthen government revenues which in turn will be invested in facilitating better social amenities for the residents.  

Now the need of the hour is to change our mindset, in order to be prepared and adapt to the new regime. As Buddha said, ‘change is never painful, only resistance to change is painful.’

Since decades, Dubai is one of the most sought after place for professionals and businessmen. Having been a UAE resident for almost three decades, I can say that there are many reasons why people stay and prosper here but one of the aspects which attracted people initially was Dubai being ‘Tax-free’.

We have been associated with the term tax-free for so long that when we talk about a minor 5% indirect tax, it creates a mental block in our minds. Secondly, we are accustomed to working in a carefree system whereas with the introduction of VAT we will have to adapt to the disciplines of bookkeeping, accounting policies, new IT and operational procedures. For a matter of fact, Dubai which is a hub of trade and financial services, only 15-20% of the businesses maintain proper books of accounts.

It's high time to change the way we operate and manage our businesses. No argument would stand before the fact that financial prudence and operational discipline which is a prerequisite of being VAT ready; will only increase the capabilities and profitability of the business. 

Now as we have the motivation of adapting to the new tax regime, what will keep us going is the change in attitude and habits.

 

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http://www.jamesmathew.com/Blog_VAT_More_an_inner_resistance_than_a_new_regime_May11.pdf