UAE faces VAT as early as Jan

"We will be the one to launch it first," Abdul Rahman Al Saleh, Dubai Customs' executive director, told newswire Reuters.

"We were planning for the last quarter of 2008 but we have put it back to the first quarter of 2009."

Oman also plans a VAT as part of a government drive to cut its reliance on oil and could bring in the measure as early as next year.

He said the tax would be "between 2 and 5%" - though below 5% - and would help compensate for revenue lost when the customs duty is scrapped, upon introduction of the VAT.

"VAT is the best tax system for strengthening the economy of the UAE," he said.

The tax will be imposed on consumer goods and services.

Al Saleh said that any inflation caused by the VAT should be less than a "diminishable half a percent".

Inflation in the second-largest Arab economy hit a 19-year peak of 9.3% in 2006 and probably accelerated to 10.9% last year, according to a National Bank of Abu Dhabi (NBAD) estimate.

In April, the UAE's economy minister said the dollar-pegged oil producer's inflation target of 5% this year would be "a miracle".

Al Saleh said that VAT could be introduced across the Gulf Arab region by 2012, but that such a move "depends on the situation and the economy and the way they do things".

Source : ArabianBusiness.com - Dubai, Umm al Qaiwain, United Arab Emirates,  dated 26/05/2008