VAT ‘to professionalise construction sector’
Summertown Interiors MD Marcos Bish says new tax will help local contractors become more efficient
A leading figure in the contracting industry has welcomed the introduction of VAT, saying that it will help professionalise the construction sector and move it forwards.
In an interview with Big Project ME, Marcos Bish, managing director of Summertown Interiors, said that while the introduction of VAT will raise prices, the proposed 5% tariff is reasonable and will benefit the industry in general.
“It’ll allow the government to generate more revenue and it’ll also allow them to make financial plans for the next 10 to 20 years, which is also good for business in general. The government will also be able to use it to fund critical projects, like healthcare, for example. They’ll be able to reduce deficits as well, so for businesses in general, it’s a good thing, even though prices will rise,” he said.
Bish also added that businesses that embrace VAT, rather than fight it, will be able to use it to their advantage, especially in the first few years of its introduction.
“If you’re not ready, you’re going to suffer with VAT. If you can be ready, then that means you’re going to be a more effective and efficient organisation, as compared to your competitors, which gives you an advantage,” he explained.
Furthermore, the introduction of VAT will help push the industry forwards, he added. With businesses and smaller local construction companies being forced to keep proper records, he predicts that the industry will see a shakeup.
“With VAT coming next year, it will also, in our opinion, professionalise the industry. If we look at the UAE economy, then we know that 60% of the revenue generated is by SMEs. The majority of the SMEs do not keep proper financial books, while even less do proper financial audits.
“Now, when you’re going for VAT, then you’re going to have to have proper financial audits. I think once companies start looking into their financials, they’ll be surprised. They’ll either become more efficient and effective, so as to optimise their business, or they’ll simply go out of business,” Bish warns.
“You need to be well prepared – not just for VAT – but also for the proper recording of transactions. Otherwise, you’ll become less efficient as an organisation if you cannot process VAT claims and you’ll run the risk of fines and penalties with the government.”
“So, we see the introduction of VAT as another professionalisation of the market,” he asserted.
Earlier this year, Gurdeep Radhay, head of tax at Grant Thompson, told Zawya Projects that VAT could have an impact on cash flows for GCC construction firms.
“For contractors and (some) construction firms, VAT will impact cash flow because VAT is payable within 30 days of the end of the quarter, during the filing,” he was reported as saying.
Radhay added that businesses would need to factor in the cost of long-dated payment terms on cash flow and the cost of funding the VAT.
