VAT scandal fails to diminish Dubai’s lustre

While the ongoing investigation by UK Customs into VAT fraud carousels involving mobile phone traders in Dubai may be impacting the region’s mobile channel sector, it is doing little harm to the emirate’s burgeoning reputation as a key global trading hub.

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By  Aaron Greenwood Published  September 7, 2006

|~||~||~|While the ongoing investigation by UK Customs into VAT fraud carousels involving mobile phone traders in Dubai may be impacting the region’s mobile channel sector, it is doing little harm to the emirate’s burgeoning reputation as a key global trading hub. Many mobile handset traders have been reluctant to continue to service partners outside the Middle East region for fear of being unwittingly implicated in the tax scams, which have also impacted country members of the European Union. The mention of Dubai in the UK investigations has resulted in mobile handset trade effectively being frozen between the UK and UAE. UK Customs officials believe that many of those involved in fraudulent activities have established temporary operations in Dubai’s free trade zones and routed inventory through the facility before closing down the business and fleeing the country. Others are thought to have used registered operations in Dubai to exchange paperwork with UK partners regarding non-existing inventory to claim VAT concessions. The controversy raises questions about the ability of Dubai authorities to police such activities in the emirate’s free zones, which by their very nature are notoriously difficult to regulate. The sheer geographical scale of Jebel Ali Free Zone, which could easily pass for a city in itself, provides key logistical challenges for Dubai’s authorities in terms of safeguarding the emirate’s reputation as a place for legitimate trade. UK-based critics that have been quick to criticise Dubai’s involvement in the scandal fail to take into account the broader impact of Dubai’s incredible 50-year transformation from Bedouin settlement to global centre for business and trade. No city in history has witnessed such change in such a short period of time. When considering the emirate’s ‘involvement’ in the UK VAT scandal, it would be wise to also consider that such fast-paced development is not without its drawbacks. Indeed, the emirate’s incredible growth and its radical transformation in fortunes have guaranteed that commercial opportunists will sometimes do anything to capitalise on the sometimes-haphazard nature of the business environment. Despite this, the Dubai authorities should be recognised for their efforts to cooperate with UK Customs and clamp down on fraudulent trader activity. As has been the case with the government’s crackdown on the importation and trade of fake products, the latest initiative also represents a positive step in legitimising Dubai’s blossoming reputation as the region’s most important trading hub and a global centre for business. ||**||

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