View of part of the Fujairah Corniche and the Hajar Mountains in the Background

Tuesday, June 10, 2008

VAT and Visa Decisions Discouraging Tourists

The comments on the online newspapers and web sites are loud and heated concerning two new decisions that are likely to discourage tourists to the Emirates.

The public debate in countries such as UK over the introduction of Value Added Tax (VAT) and Australia with its Goods and Services Tax (GST) was enormous. The UAE does not have a protest tradition, as such activity is seen as a criticism of the government and its leaders, but prospective tourists to the UAE will simply voting with their wallets and passports. While authorities are saying the VAT might only be a 5% tax, evidence from other countries illustrate the way VAT and GST increase incrementally to raise more revenue.

The UAE has had an attractive image of tax free shopping and this has lured tourists from all over the world who have combined shopping with other forms of tourism. With the introduction of the VAT in early 2009 this attraction will be tarnished, hitting the tourism, commercial and accommodation sectors of the Emirates.

UAE newspapers (Khaleej Times, The National, Gulf News) are reporting the concern of tour operators and residents over the complicated and confusing visit visa fees that are due to kick in from August 1.

Certain nationalities such as Egyptians, Syrians, Pakistanis and Indians are not eligible for tourist visas and will have to pay Dh500 for a one-month visit visa. This will impact greatly upon families who are seeking to holiday and catch up with relatives in the UAE.

Osama Bushra, Chief Operating Officer of travel agency Travco, was reported in the Khaleej Times saying that these groups, traditionally with large Arab families and staying a minimum of one week, contributed significantly to the tourism economy.

The complexity of the new visa categories smacks of bureaucracy gone mad and surprisingly runs counter to the fast, ‘can do’ spirit that UAE has become famous for around the world.

The new red tape will discourage the large number of transit tourists and people on long routes who might otherwise have enjoyed a few days in the UAE and the chance to break their journey.

The new fees and the hassle of getting visas is likely to reduce the number of visitors and cause Dubai to fall short of its mark in aiming for 10 million visitors by 2010 and 15 million by 2015.

According to the Cabinet, the changes in the fees and structure of the visit visas are part of the UAE government's plan to combat illegal immigration in the country.

This heavy-handed and costly approach (financially and administratively) with VAT and visas, seems set to knock the tourism industry and have a major flow on effect with hotels and shopping.

Dr. Geoff Pound

Image: “The new fees and the hassle of getting visas are likely to reduce the number of visitors.” (Photo courtesy of The National)