The understanding of financial perspectives of the United Arab Emirates is an interesting topic from a scientific point of view. The country is famous for its infrastructure and high quality of tourist services, enormous renewable energy resources, and considerable economic and human resource potential. Such resources require an efficient financial system regulating the incomes of large-scale business and the federal budget.
The developed infrastructure and the attractiveness of tourism to customers who have a high degree of paying capacity make the UAE known worldwide and attract foreign investments. Yet, an appropriate state policy remains vital to strengthening international cooperation in many spheres, like energy supply, real estate, automobile industry, and many others.
The taxation system within the UAE is devoid of the value added tax (VAT). However, it has certain legislative norms that define the ways of charging the businesspeople in order to increase the state budget. There are few studies dedicated to the taxation system of the UAE as the country lacks workable legislation and enrolls foreign investments. Therefore, the financial system requires knowledgeable management to ensure high living standards for corporations and promote a social welfare system. The profitability and sustainability of the financial system of the UAE require the adoption of VAT alongside with the existing taxation systems because it will enable numerous corporate businesses to develop and promote social welfare and human resources to find more jobs within the federally financed sphere.
The Analysis of VAT in Many Countries and Economic Peculiarities of the UAE
The consideration of the taxation system of the UAE presupposes learning its businesses and the ways they are managed. Yet, in order to understand the ways of VAT implementation, it is important to analyze the measurements according to which countries succeed in optimizing costs within numerous spheres. Particularly, the introduction of VAT triggered heated debates in a lot of developing countries (Alavuotunki & Pirttilä 2015). Boosting government revenue proved to be a favorable advantage of such a policy, though numerous investigations of the economy at the macrolevel showed the difficulties many companies face. VAT helps avoiding many indirect taxes, yet it helps forming inequality. The international trade and import are the spheres convenient for implementation of VAT. Taking into account the UAE’s engagement into foreign direct investment and importation of energy sources, taxation of foreign products could enrich the state budget (Keen & Lockwood 2010). The detailed characteristics based on the analysis of the trends of economic growth in various countries showed rapid growth by 2010 (Appendix A-B).
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Though Sub-Saharan Africa demonstrated drastic difference compared to 1960, the Middle East countries, among which there are the UAE’s neighbors, showed lowest indices. That is why, the UAE has not implemented VAT, taking into account the unfavorable regional experience, i.e. macroenomic factors. Lower indices can be explained by wars and unsetting geopolitical conditions. Even though the UAE has more favorable conditions for economic growth and has succeeded in overcoming the crisis of 2008, its government remains restrained in implementing VAT. The USA’s indices of GDP remain lower compared to the European countries of the former Soviet Union (Appendix B). This fact means that a higher level of economic development of the States can promote stability, but a lower geopolitical position does not create difficulties for acquiring higher GDP.
The key function of VAT enforcement for both developing and developed countries is the transaction control provided for the government (Pomeranz 2013). Nevertheless, a ‘third-party’ role in Chile experience and side-control of essential governmental issues can promote frauds if the governmental system is imperfect and there is no distinct financial and legislative documentation to demonstrate governmental financial operations to its citizens.
Later, investigation held by Keen (2013) represented different indices in GDP increase of the leading Europe (Appendix C). The trend of GDP increase in the Middle East region demonstrates positive dynamics in VAT implementation and stabilization of the regional economy in 2000-2008. The upgrading of the numerical data demonstrates business efforts for cost improvement (Appendix B). The 2010 year’s trend of increase (Appendix C) represents growing possibilities for the UAE.
GDP indices after implementation of VAT for the UAE and its neighbors in the Middle East region grew gradually. Possible cooperation in the sphere of renewable energy is very promising due to its abundant wind and solar energy potential (Appendix D-E) and import possibilities, which can improved after applying VAT. Though in a lot of countries of the former Soviet Union and Central Europe VAT percentage comprises the margin of 20%, the establishment of the necessary value percent remains the task of financial analysts that the government should consider.
Knowledge management (KM) within the system remains the key issue presupposing the formation of the strategy of the taxation system. Taking into consideration larger and smaller manufacturing companies in the UAE, Hussain, Ajmal, Khan & Saber (2015) have developed a questionnaire according to certain parameters. The latter included know-why, know-how, and know-what attributes and flexibility, cost, quality, and delivery as manufacturing capabilities. Flexibility and the trend for innovation and adaptation to the latest technologies remain a prerogative of large scale companies in the UAE (Hussain, Ajmal, Khan, & Saber 2015).
Having considered available resources showing the peculiarities and experience of implementation of VAT in countries with different levels of economic development, it has become possible to state a positive dynamics for the economic growth of developing and developed countries on different continents. Yet, there is a need to carry out a profound investigation of the clarity of the financial governmental systems of less developed states. The choice of proper methodology and the analysis of numerical indices emphasize the importance of a further financial policy of the UAE.
The UAE efforts for implementing VAT anticipate the study via different scientific methods. Peculiarly, The investigation of VAT implementation in the UAE and other countries requires a statistical analysis of the data concerning the GDP indices from 1960-2010, the analysis of flow charts and available natural resources of the UAE as well as a scientific study of the factors and processes following the VAT implementations. A further investigation includes learning the ways of human resource (HR) management in the banking sphere (Cherian & Farouq 2013) and the review of HR practices at the state level within the UAE (Cherian & Jacob 2012; Koalchi & Akan 2014).
Banking organizations are important in a lot of countries in general and in the UAE in particular. The majority of financial operations on the international and domestic level determine the ways in which numerous transaction undergo taxation in case there is a necessity or norms anticipated by the legislative system. This sphere is very close to human recourse management, particularly the social sphere (Cherian & Farouq 2013). Banking HR, financial performance, and the ways banks work with people of different incomes also matter in the study of VAT implementation in the UAE.
The analysis of the Abu-Dhabi company ETISALAT (Kolachi & Akan 2014) consider the extended human resource development (HRD) policy towards providing corporate thinking and establishing high performance. As a result, the analytical investigation and data analysis can exemplify the state level standard for efficient human resourcing and financial management of the UAE in general.
The generalization and systematization of the environmental sphere (Cherian & Jacob 2012) and the policy of the HR management implemented are of a scientific interest due to profound renewable energy potential (Appendix D) and to climatic conditions of the UAE.
The combination of statistic and analytical approaches concerning the financial system and its peculiarities for VAT implementation alongside with the analysis of HR management in the UAE constitute the methodological component of the study.
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The data from 1960-2010 (Appendix A-B) concerning the world’s indices of implementing VAT in various regions predetermine the impact of economic crises in different years, domestic policy issues as well as the use if capital reserves in case of natural catastrophes. Sub-Saharan Africa has the highest rates of adopting VAT from 2000 to 2010. The countries of the region applied a considerable VAT index, taking into account the level of its development and the payment possibilities of the inhabitants.
A high tax share anticipates the growth of tax efforts, thus a budget imbalance becomes obvious. Yet, the American continent demonstrates a more stable increase in VAT application due to a leveled budget sphere and less inequality. The middle class prerogative in the USA taxation system is noticeable. Consequently, its citizens have high paying possibilities and can afford to pay taxes thanks to proper revenues. Larger scale businesses, which get higher incomes as well as qualified personnel, have higher incomes and the majority of taxes remain the same. Besides, the legislation of every state anticipates its margin income with further numbering of VAT alongside with other taxes.
When analyzing statistical indices of VAT implication on different continents and revenue margins (Appendix A), the mean in European countries is the highest. The common market of the EU and similarity of most marketing and trade policies within the Union allows overcoming profound crises, like those in Spain and Greece. Moreover, the flexibility of the policy towards the countries willing to enter the EU takes into account stronger sides and natural potential of those developing countries.
The UAE is remarkable for its energy potential. Desert climate conditions, high wind power density, and the wind speed up to 7-8 m/s at 50 m distances (Appendix D) create profound energy potential domestically as well as extend the possibilities for becoming a renewable energy importer. The measured wind and solar potential of 61 in 1990 and 221 in 2008 respectively (Appendix E) has certainly increased due to global warming by 2012-2015.
When considering the HR policy with regard to energy issues, the environmental strategies encompass stakeholders’ pressure, corporate image, and financial performance (Cherian & Jacob 2012). The factors help to understand the obvious connectivity of motivational component for developing human resource performance. Due to stakeholder’s pressure, the staff of the Arabic companies meets the deadline, work as a team with mentoring tuition and other practical methods of education.
The links of HR management, business strategies, and culture remain obvious. The extended approaches within the sphere of ecology predetermine the ‘green’ approach for human resourcing. Such system connectivity helps to involve the mentality of the Emiratis as well as conduct a survey concerning the attitude to work and collect the data displaying financial results of various businesses.
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Results and Discussion
The numerical and analytical data of VAT implication with the help of a proper domestic policy have proved the effectiveness of this kind of taxation. For example, the regional experience of Sub-Saharan countries and the rapid implementation of VAT helped in increasing financial indices. Still, high percentage of taxes regardless of income rates and business scales slowed the GDP growth in the countries in spite of extended application of VAT.
In the UAE, the role of HR management remains vital for the spheres of telecommunication, banking, and environment. The investigation of the baking sphere within the Emirates (Cherian & Farouq 2013) held in recent years, demonstrates the obvious impact of leadership strategies upon the financial performance. The participation of HR managers in senior management team meant involving the staff in decision making. To the inclusion of an HR department into the corporate strategy can help rethink insufficient leadership, create a favorable team spirit, and help to better understand the primary conditions of high performance. The leveling of decision making potential of HRs and the top management team can lead to profound improvements.
Customers’ psychology also plays an important role. It is worth taking into account the needs and potential of the companies and banks’ staff as well as intercommunication and knowledge of financial results to design management strategies and encourage the whole team to achieve high results. Core markets, costs, competitors, profitability benchmarks, and stakeholders (Cherian & Farouq 2013) on the domestic and international levels, depending on the type of business and its end customer, should be the principal sphere of knowledge of an HR manager.
The common knowledge management strategy for most UAE companies can regulate intercommunication between the top leaders of the company and help the personnel better understand what their employers need. The inclusion of HRD and HR divisions in the study of ETISALAT (Kolachi & Akan 2014) also represents the top management-HR integrated approach to the strategic development of the UAE companies. As ETISALAT belongs to large-scale companies, the corporate culture of the firm and its paramount role in the established HR management is a national and international speciman for most businesses.
Providing firms with favorable creating conditions anticipates an extended HR policy. The UAE have profound experience of HR management, industrial potential necessary for establishing a high living standard as well as power to overcome any crisis. VAT implementation can be applicable, addressing potential and field possibilities in the current marketing conditions.
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VAT implementation in the UAE plays a vital role in directing the country’s development in various spheres. It also helps to establish a workable human resource policy on the governmental and corporate levels.
The complex consideration of HR management and VAT implementing in the UAE creates a synergic effect that can decrease unemployment rates and increase the income of the Emiratis. Thus, paying capacity of the citizens can increase due to the preference of import and extended international cooperation. Yet, a proper domestic policy requires establishing exact VAT tariffs according to income and a business scale.
The statistical and numerical data indicate enormous economic possibilities for the development of the UAE companies. The skillful work of HR managers alongside with top management teams in large-scale businesses creates productive cooperation between the leaders and the personnel.
The interaction of the management team at different levels and the delivery of the business aim to all the departments enable firms to create a distinct and workable system that stimulates strategic growth. The linkage of financial improvements and HR measurements are obvious. Thus, the peculiarities of VAT implementation should concern the income of the personnel and establish a minimum salary sufficient for the VAT margin.