Inspectors are reportedly already monitoring retail prices ahead of the introduction of the VAT, which comes into force in the UAE on January 1, 2018.
This means that retailers in Dubai who begin charging VAT on purchases before the tax is introduced, or who charge more than the 5% allowed, will face a series of escalating fines, a Dubai government official told local news media.
“So we will concentrate in the next few days on ensuring that there is no retailer that starts charging VAT before 1 January (and) there (are) no retailers that are overcharging,” Mohammed Ali Rashid Lootah, chief executive of Dubai Economy’s Commercial Compliance and Consumer Protection (CCCP) unit said.
He said that the CCCP’s role was not to ensure VAT is implemented, as that is the responsibility of the newly-established Federal Tax Authority.
“Our job here is to ensure that there is no manipulation in the market under the excuse of implementing the VAT. So in case a trader or a merchant increases 7% or 10%. Or in case he implemented the increase before the date,” he said.
Lootah added that any retailer caught attempting to charge VAT before January 1, or charging more than the 5% required under the VAT regulations, faces an initial fine of Dhs2,000, which will double with every repeat offense.
“There are two types of increase,” Lootah said. “Some products depend on international markets—for example, gold depends on the price of gold. So we’re not talking about the regular increase of products or raw materials, we’re talking of someone who took advantage to spike the prices under the excuse of the VAT implementation,” Lootah said.
Article 26 of the UAE’s Tax Procedures law states tax evasion penalties include a prison sentence and a fine of no more than five times the amount of the evaded tax, or either of the two.