Abu Dhabi, (Business News Report)| UAE’s inflation rate continues to rise for the fifth consecutive month, according to data from the Federal Competitiveness and Statistics Authority.
The data showed that the UAE’s annual inflation rate rose by 2.5 percent at the end of last year.
According to the authority, the inflation rate recorded 108.62 points last December, compared to 105.97 in the same month of 2020.
The increase in annual inflation was due to the rise of 9 groups, with food and beverages at the forefront by 3.71 percent, followed by tobacco 0.65 percent, and clothing and shoes 0.51 percent, the data indicated.
The housing, water, electricity and gas group decreased by 2.57 percent, education by 0.20 percent, and miscellaneous goods and services by 1.02 percent.
On a monthly basis, inflation in the UAE increased by 0.02 percent last December, from a point of 108.6 in November 2021.
After the difficult year of 2020 due to the Coronavirus repercussions, 2021 came in the Emirates to witness a relative recovery to resume its economic path with sufficient flexibility, amid ambitious long-term strategies as it entered the new fifty-year plan.
Tax on business profits
In a related context, global credit rating agency Moody’s said that the UAE’s decision to impose a tax on business profits is the most important financial development since 2018.
The agency stressed that the new tax will contribute to expanding and strengthening the federal government’s revenue base, and most likely it will enhance the revenue base at the level of the emirates, if a model is adopted closer to the same model of distributing value-added tax revenues currently.
The agency said that the new tax revenues will constitute a new source of income in addition to fees for licenses and services.
Although, the agency expect the large role of free zones in the UAE’s non-oil economy to limit the financial advantages of the tax, given that the tax is not imposed on a large segment of companies operating in the free zones.
The agency pointed out that the impact of imposing a 9% tax on local companies in the UAE is considered a negative development on the level of credit assessments of these companies given its impact on their liquidity flows.
However, it said that the impact of the new tax remains limited on the credit status of large companies thanks to the flexibility that these companies enjoy.
It enables them to raise the prices of services or products they provide, or to adjust the cost structure and reduce dividends to shareholders.
