Five of the largest international institutions concerned with competitiveness rankings have listed the UAE among the top ten globally in 28 competitive indicators related to the finance and tax sector for the year 2020. This was revealed through monitoring conducted by the Federal Competitiveness and Statistics Authority, which documented rankings from the Global Competitiveness Yearbook, reports on the Prosperity Index, travel and tourism competitiveness, global talent, and Competitiveness 4.0, along with some other specialized international reports.
The evaluations from these reference indicators align with assessing the efficiency of the business environment in the UAE, attributed to the robust economic infrastructure supported by the absence of personal income taxes. There is also confidence that the financial policies adopted by the UAE are highly flexible and diverse, allowing for enhanced economic growth and readiness to face the conditions imposed by the COVID-19 pandemic through a comprehensive sustainable development approach.
The monitored international competitiveness indicators included 28 vital areas in finance and tax, where the UAE ranked first in actual personal tax brackets, profit tax rates, and lower tax evasion and indirect tax collection. The UAE also placed second globally in corporate tax collection and actual growth in government consumption spending as well as capital and property tax collection. Furthermore, it ranked third in public fund transfers, local central government debt, and low consumption tax rates.
In January 2018, the UAE implemented a 5% Value Added Tax (VAT) on most goods and services supplied at each stage of the supply chain. Prior to this, in the last quarter of 2017, an excise tax was introduced targeting the consumption of health-impacting materials such as soft drinks, tobacco products, and energy drinks.
The UAE's membership in the top ten for business environment competitiveness in tax and finance issues stems from the absence of any plans to impose income taxes, with a focus solely on indirect taxes, namely "VAT" and "excise," which achieve positive goals that reflect positively on citizens and residents, improving consumer behavior and reducing the consumption of harmful goods.
While many countries worldwide are moving towards increasing taxes on personal and corporate profits, the UAE has topped global rankings for the lack of actual personal income taxes and low tax evasion, enhancing its suitability for attracting foreign investments in the near future. The World Economic Forum's 2020 report ranked the UAE third globally for the low consumption tax rate and fifth for the minimal impact of taxes on work incentives, while it placed eighth globally for the impact of tax prevalence on investment and seventh for the availability of venture capital, according to the Legatum Institute’s Prosperity Index report.
It is noteworthy that the strengths and competitiveness of the UAE business environment are evident in the absence of any income taxes for companies, alongside low rates for excise and VAT compared to the rates imposed in other countries worldwide, as confirmed by international competitiveness indicators.
