The increase of the value added tax in the UAE, effective next year, is expected to intensify the suffering of UAE residents, the majority of whom already live under debt.

Moreover, the VAT is also expected to hit some trade activity, such as the diamond industry and the construction industry, as it will raise the cost of services and goods for the residents. According to a study by Amazon’s PayFort, recently published on personal debt in Arab countries, almost 50 per cent of the UAE’s residents are drowning in a sea of debt.The UAE and Saudi Arabia have both decided to impose a five per cent VAT on sales next January, while the rest of the Gulf countries have postponed implementation.

The UAE imposed a 100 per cent tax on tobacco and alcohol products and 50 per cent tax on carbonated drinks this month, known as the selective tax.

According to the UAE’s the National newspaper, Emirati Economy Minister, Sultan Al-Mansouri, said the selective tax will generate $3.2 billion in its first year and $5.4 billion in its second year.

The study also stated that many Emirati residents who are not in debt are unable to save.

According to the study’s figures, about 46.7 per cent of Emirati residents, i.e. 4.3 million people are suffering with debt, while 12.8 per cent are applying for loans due to the fact they do not have enough money for living expenses.

Moreover, 28.7 per cent admitted they were unable to save any of their money due to the high living costs, while 38 per cent said they can only save ten per cent of their income.

The study ranks the UAE as third in the world with the highest percentage of the population in debt amongst the countries included in the study. These countries are the following: UAE, Saudi Arabia, Qatar, Kuwait, Lebanon, Egypt and Jordan.

Egypt was ranked first in terms of debt, with 57 per cent of the population in debt, while Saudi Arabia ranked second with 47 per cent.