UAE Reviews Progress Regarding Tax Transparency

The UAE government held a meeting in Dubai where local ministries attended to discuss matters such as the UAE’s progress and development according to global tax transparency requirements.

The meeting was intended to prepare and organize matters for the second assessment (Phase Two) , where the Organization for Economic Cooperation and Development's Global Forum would examine Transparency and Exchange of Information for Tax Purposes. During the second stage, the organization will assess how efficiently the UAE authorities exchange information between them. During the Phase One, the Organization for Economic Cooperation and Development's Global Forum on Transparency and Exchange of Information for Tax Purposes reviewed the UAE’s legal structure and treaty agreement which would consequently enable exchange of information.  During the meeting, the officials also discussed recent improvements made on the tax information exchange.

It is a known fact that the UAE is the first Arab country to be part of the International Steering Committee. This only became possible when the UAE’s Ministry of Economy signed a Memorandum of Understanding (MoU) with the Secretariat of the Global Forum on the Transparency and Exchange of information, thus enabling them to participate in the committee.

Besides the Memorandum of Understanding (MoU), the Ministry also signed five other MoUs regarding transparency and exchange of information with key organizations and free zones, like the Jebel Ali Free Zone, the Fujairah Free Zone Authority, and the Dubai Multi Commodities Centre, UAE Central Bank and the Dubai International Financial Center

The United Arab Emirate is Among the Most Competitive Countries

According to expert analysts, the UAE will carry on being amongst the leading competitive economies in the following years. This is mainly attributed to their progressive infrastructure and foreign investment policies.

The World Economic Forum’s (WEF) Global Competitiveness Report for 2014-2015 ranked the UAE in the 12^th position. In comparison to the previous year, the UAE was ranked in the 19^th position, thus has jumped seven positions in a year. The report ranks 114 economies in a whole, based on their competitiveness. The report also revealed the UAE was positioned first amongst other Middle East and North African countries. Surprisingly, the UAE was even ranked higher than Denmark and Canada.

The UAE’s Minister of Economy, Sultan Al Mansouri, stated that the UAE is in fact thriving in terms of its economy, politics and development.

At the same time, the UAE’s Minister of Energy, Suhail Bin Mohammed announced that the UAE’s 12^th position in the competitiveness report prides the people of the UAE and reveals the country’s status within the world. The UAE has succeeded in becoming one of the most developed countries of the world, in terms of investment, human resources and other fields as well.

The Senior Economist of the Middle East and North Africa at the Standard Chartered Bank, Shady Shaher, also expressed his view saying that the UAE’s progressive and improved infrastructure and its commitment to beneficial business policies will continue to strengthen the country’s economic strength and force. He added that due to the UAE’s position their policymakers would continue making the required decisions and taking the needed steps so as to lead the UAE to higher rankings.

The Founder and President of Nasser Saidi and Associates, Nassar Saidi believes the UAE’s macroeconomic stability will carry on in the following years. He stated that the 2009-10 crisis has come to an end and that the UAE has confronted the risk and debt situations incredibly well. Moreover, he stated that he did not expect any obstacles or challenges to arise concerning the UAE’s macroeconomic stability. He presumes that the country’s infrastructure and logistics will constantly improve and that the UAE will possibly hold a low inflation rate. In accordance to Saidi, in order to increase in competitiveness the UAE should invest in its infrastructure and human power needed to open up new fields, like robotics and aerospace.

The recent WEF report revealed that the UAE was ranked first as having the lowest inflation rate and lack of organized crime globally. The UAE was also ranked in third position for its infrastructure, effective products market and their trust and dedication towards their politicians. Further, the UAE was awarded fifth place for its macroeconomic environment and its government’s effectiveness and sixth for its education level and training. Furthermore, the UAE came seventh for its institutions and organizations, eighth for its effective labor market, 14^th for its superiority concerning business, 17^th for the development of their economic market, 24^th for its innovative skills and willingness concerning technology and finally 38^th for its health system and primary education system.

Overall, the WEF basis its analysis on three sub-indexes linked to a country’s economic improvement. The report showed that the UAE came second within the first sub-index which is referred to as the Basic Requirements Index. This index takes in to account institutions, a country’s infrastructure, its macroeconomic strategies, health and primary education. 

In addition, the UAE came 14^th in the second sub-index which examines a nation’s higher education and training, efficiency in the goods market, labor market effectiveness, financial market improvement, technological readiness and of course the size of its market. Finally the UAE was ranked 21^st in the third sub-index, which analyses a country’s business sophistication and innovation. 

Russia has a deep-pocketed economic supporter that is also a staunch US ally

It is a known fact that China has been financially supporting Russia with its continuing conflicts in Ukraine. During the summer, The United Arab Emirates (UAE) has also been offering Russia financial support and aid, and thus establishing closer economic ties.

The UAE’s most obvious loyalty to Russia was shown with the deposit it made in the Russian Direct Investment Fund. The Russian Direct Investment Fund (RDIF) is owned by the Russian government supported by private equity funds with more than 10 billion dollars in foreign capital that offers resources financing to Russian organizations and companies. Some of the bank’s Western private equity board members include Apollo’s Leon Black and Blackstone’s Steve Schwarzman. Nonetheless, Middle Eastern countries, and especially the United Arab Emirates, governed by Abu Dhabi, have offered the majority of funds the past years.

Funds from the Middle East include:

•          In 2013, $5 billion was given the Department of Finance led by Abu Dhabi and was considered as the largest amount of money invested into Russia by a Middle East country.
•          In 2013, $1 billion was invested by Dhabi’s Mubadala Development Company.
•          In May 2014, Qatar’s Investment Authority invested $2 billion.

Other countries, outside the Middle East, also invested in Russ

ia. As recorded China Investment Corp. Invested $1 billion, the Japan Bank of International Cooperation invested $500 million and approximately $200 million was received Caisse des Depots in France.

As reported by Bloomberg, the RDIF may be transferred to the central bank of Russia, to prevent it from being sanctioned. However, a RDIF representative stated no official decision has been made and that discussions concerning this matter started two years ago.

Sanction-linked bills supported by Republicans in the USA Senate may apply pressure to USA private equity advisors to resign from the RDIF board and USA companies may be forced not to do business with the RDIF. Both these actions will subsequently influence the investors’ profits and will also negatively influence the Russian economy.

The RDIF investments were made prior to Russia’s invasion into Crimea. The investments were made after multiple meetings between Crown Prince Sheikh Mohammed bin Zayed Al Nahyan and Russian President Vladimir Putin over the passing years, where strong ties were created between the nations. In the meeting the signing of the tax treaty and nuclear agreement were also decided upon.

Abu Dhabi first invested in Russia the amount of $100 million in a Russian circumvent fund in 2010. Since 2010, all the seven emirates included in the UAE have been creating alliances and investing large amounts of funds in Russia, amounting to approximately $18 billion as stated by the UAE Minister of Economy Sultan bin Saeed Al Mansouri last February.

Since Crimea was invaded in March, the UAE free zones authorities have promised to further support Russia financially, establishing stronger bonds between them. According to reports, airport officials from Dubai travelled to Moscow in April in search of potential investors. Furthermore, in June the UAE’s Minister of Economy also travelled to Moscow, accompanied with 40 business and government officials, and agreed upon more than double the amount of trade between the two nations. The trade agreements would amount to approximately $7 billion in the year 2014. The UAE representatives and executives also conversed and made agreements concerning energy and agricultural projects with Russia. Finally, in August Etihad, a UAE government operated carrier stated freight services between Abu Dhabi and Moscow would commence.

On the other side, UAE also depends on Russia’s financial support. In the past ten years, Russians have frequently visited Dubai seeking warmer climate and enjoying tax-free shopping sprees. Russians are known as the UAE’s best consumer visitors.

Due to the billions of funds, the UAE countries derive because of the oil reserves they own, they are not likely to be influenced by the decrease in investments made by the Russians or by the decline in numbers of Russian tourists that visit the UAE.

Nonetheless, due to the UAE’s long-term relationship and alliance with the USA, they are bound to feel some political turbulence soon, since nations are planning to meet this week to discuss Russia’s invasion of Ukraine. Even though the UAE are not members of the NATO, a UAE representative is attending the alliance summit, which will take place in Wales, as an observer.