The inevitability of taxes in the UAE has been a reality for some time, and with the state of the hydrocarbon industry it comes as no surprise that draft laws for value added tax and corporate tax are being pushed through.
The UAE has made clear of its reluctance to press ahead with tax laws unless its GCC counter parts follow suit as it worries about its regional competitiveness. But once passed, what will it mean for the UAE and other GCC countries which have positioned themselves as tax havens for businesses and expatriates alike?
Oil prices are unlikely to return to the levels previously seen and as non-oil sectors in the UAE struggle to make up the income gap, the government will need to find alternative streams of revenues if it is to continue with ambitious development plans.
As living costs in the UAEs major cities continue to trouble residents, the introduction will do little to alleviate these concerns. Coupled with a strengthening dollar, which has made places like Dubai a much more expensive place to visit, live, work and invest in, the timing of the proposed taxes could cause some short term damage.
The reality is the UAE is unlikely to embark on this journey alone and it is difficult to imagine a collective effort from the GCCs weaker economies such as Bahrain and Oman who will fear that taxes could further dampen their efforts to attract business.
Established business hubs like Dubai and Riyadh are better positioned for the short term impact of taxes but it will be vital to get other countries on board in order for these laws to materialise.