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Will VAT affect the bright start of 2018?
One of the primary reasons for expatriates to bring their families to the UAE was its status of the tax haven. However, with the introduction of the 5% value-added tax (VAT) in the UAE from today, families are bound to strategize their monthly expenses and budgets.
Khaleej Times caught up with one such family to take a closer look at the family’s biggest expenses. Living in Discovery Gardens, Pakistani national Rahat Hussain and Mediha Zafar are parents to five-year-old twins Zara and Zoya Hussain. Mediha is an HR administrator while Rahat is working as a social media resource manager. “I was born in the UAE and spent a few of my growing up years here. Obviously, the economy has changed a lot as compared to back then,” said Mediha.
Topmost expenses
Mediha revealed that house rent and school fees were, in fact, the two biggest expenses for her family. “Rent and school fees are equally expensive. We pay Dh68,000 for rent, which is inclusive of the chiller and other associated rent expenses, and Dh25,000 tuition fee per student,” she said.
The school transport costs Dhs 12,000 for both kids, and the school uniforms, books, after-school activities cost within Dhs 1,000. She added: “The expenses in terms of their school fees and related expenses are constantly fluctuating, especially as the girls are growing,” said Madiha.
Food, electronics, grocery items are far more affordable in the UAE according to Mediha. “It is not very expensive. We spend between Dh 2,000 and 2,500 per month and sometimes I wrap it at Dhs 1,500 if I find a couple of good deals,” she said. The prices also depend on the kind of food, as vegetables and lentils are comparatively cheaper.
“However, if you were to throw a party, it may get a bit more expensive,” she said. The family added they visit a nearby hypermarket once a week for shopping unless small items get exhausted in midweek.
“We used to try shopping online from a retailer group, but as they ended the service, we order from nearby supermarkets and that does not exceed Dh100,” added Mediha.
Since the family enjoys eating out, they have a takeaway or visit a mid-range restaurant once or two times a week costing her between Dhs 80 and100. “Fine dining is not often,” she added.
The family watched movies once in two weeks, paying Dhs 35 per ticket. However, mobile phone usage was not that expensive as their employers pay for their connections, Dhs 100 per month.
Mediha said: “In the UAE expenses are constantly fluctuating. There is no saying what expenses may come up and what may not. So, we’ve put a ceiling on how much we can spend every month on each commodity, outside of rent and school fees, which are two unavoidable expenses. For example, on groceries, we’ve put a ceiling of Dhs 3,000. On public transport, it is Dhs 1,000 one way and we cannot spend more than that.”
The family intends to wait a couple of months, or the first quarter of the year, before concluding, if the ceiling in expenses needs to be changed. “If we’ve dipped into our savings, then we would need to overhaul the budgets. But for now, we are just going to wait and watch,” she added.
Don’t hit the panic button!
Any change and something as monumental as the introduction of the VAT is bound to create anxiety. Yes, people, especially families with school-going children, are apprehensive but there is no need to hit the panic button as yet. Become conscious of your spending habits and make amends where necessary to cope better with this new reality. A charge of five% won’t break bank accounts and disrupt lifestyles unless you allow it to by indulging in mindless consumption.
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