Residents in the traditionally tax-free haven of Dubai are preparing for the introduction of a 5 percent VAT.
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Saudi Arabia and the United Arab Emirates, which have long lured foreign workers with the promise of a tax-free lifestyle, plan to impose a 5 percent tax next year on most goods and services to boost revenue after oil prices collapsed three years ago.Stores, gyms and other retailers are trying to make the most of the remaining tax-free days in Saudi Arabia and the UAE, encouraging buyers to stock up before the VAT is rolled out on Jan. 1, 2018 .The National newspaper, based in Abu Dhabi, says the cost of living in the UAE is expected to rise about 2.5 percent next year because of the VAT.As the government adjusts to lower oil prices, the UAE is expected to raise around 12 billion dirhams ($3.3 billion) from the tax.Still, Saudi Arabia is facing a budget deficit until at least 2023 .In line with IMF recommendations, Saudi Arabia and the UAE this summer imposed a 100 percent tax on tobacco products and energy drinks, and a 50 percent tax on soft drinks. VAT, however, is by far the most wide-ranging tax to be rolled out in the two countries.
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