Impact of Proposed Corporate Income Tax in UAE - Special Reference to FDI and GDP

Abstract

In this research paper, the authors provide an empirical approach to evaluate the expected impact of first-time corporate income tax implementation on an economy. The main objective is to investigate how taxes could affect foreign direct investment in the host country and its economic growth. The authors use a comparative study approach by evaluating the outcomes in countries with similar economic environments. Data collected from other GCC countries like Saudi Arabia, Oman, Qatar and Kuwait are used as samples from the time they imposed corporate income tax for the first time. A Mann- Whitney U test is employed to test the statistical significance of the variables in each of the four countries. It reveals a negative relationship of the corporate tax imposition on the sample countries' FDI growth and GDP growth. Using this result as a basis, policymakers can expect similar results in the UAE in short to medium term. However, if policy makers are made aware they could act pro-actively to implement policies that could reduce the adverse impact of tax implementation and may also manage to reverse the impact, projecting themselves as role models for others to pursue.