Be it online shopping, connectivity to work remotely or hybrid schooling, the one thing that makes Dubai and the UAE stand out is that how quickly it adopts innovative tech to make everyday life easier. The country which used online apps, telehealth for remote monitoring of patients and a range of remote services to bounce back from the lockdown in no time, was ranked among the world’s top 10 countries in terms of digital competitiveness. With the e-commerce boom and social distancing, came e-payments and online banking, which has opened doors for fintech as more than 50% people are using digital payments. As of now there are almost 800 fintech startups in the UAE & beyond transactions they also provide quick microfinance, insurance and investment opportunities.
This gives us a glimpse of the way technology is enhancing day to day financial activity in the UAE, where blockhain & cryptocurrencies are being adopted at a quick pace, along with remote, AI-backed transactions at brick and mortar stores. The digital transaction value in e-payments is expected to surpass $26 billion in 2022, as the value will grow at a rate of 8.29% annually. Anticipating the current economic boom, which was sustained during the pandemic thanks to technology, the UAE government had introduced a VAT levy on goods in the largely tax-free country. Apart from generating tax revenues of more than $26 billion from its implementation in 2018 to 2021, VAT also paved the way for a corporate tax which will come into effect in 2023.
But these additional levies won’t be a burden for businesses considering the sales volumes and margins that the Emirati market promises, and also since the tax rates in the UAE are still lower than most of the world with a 5% VAT and a 9% tax on corporate earnings. To make doing business even more easier while complying with OECD’s global taxation standards, the UAE allows tourists to claim refunds on taxes and also for foreign businesses as well as on construction costs of new residences for personal use only. With the implementation of these taxes, the UAE’s FTA has also scaled up inspections to detect violations by 104% and has introduced whistleblower laws to protect and reward people who report suspicious financial activity that may be part of tax fraud schemes. To make compliance hassle-free, the FTA also has an online portal for tax filing and a platform where businesses can finish VAT registrations within 15 minutes, through a three-step process. E-services for taxation are just an extension of the UAE government’s digitisation drive to offer e-services in business matters, healthcare, financial matters and education among others.
As part of this surge towards innovation, the FTA’s board of directors has also accepted plans to introduce digital solutions for convenient tax compliance. They came to the decision after reviewing a report by the tax authority on plans to enhance the country’s tax systems and upgrade the customer experience through easy-to-use online platforms. The report also mentioned promising statistics such as the rise of VAT registrants to 367,157 in the first three months of 2022, and a 3.6% increase in the number of excise registrants while tax agents went up from 433 to 446 between end of 2021 and the first quarter of 2022.
Innovation also facilitated quick processing of VAT refunds on building new homes, which went up by a massive 56% between 2021 and 2022. Technology was also used by the FTA in the form of digital tax stamps on cigarettes and chewable tobacco, in order to regulate the uncontrolled sale of tobacco products with public health in mind.
With the financial statements reflecting success in efforts to ensure compliance, the FTA is confidently moving towards streamlining tax systems, to encourage tax compliance among customers via innovation.