Business as usual at Dubai Mall as shoppers shrug off VAT hike

On the first day of its introduction, the VAT charge appeared to be widely applied at Dubai Mall outlets (Shutterstock)

DUBAI: It was business as usual at Dubai Mall on Monday as consumers shrugged off the introduction of value added tax (VAT) to indulge in one of the UAE’s favorite pastimes: Holiday mall shopping and relaxing.
The mall, which claims to be the biggest in the world by footfall (the number of people entering it), was thronged on New Year’s Day, despite the 5 percent price hike that appeared to be pretty universally applied.
Retail assistants reported that there was little difference between business on Dec. 31 — when prices were in theory 5 percent lower — and Jan. 1 after the imposition of VAT. Many retailers appeared to be willing to absorb the increase, at least on small-ticket items, for the time being.
At the upmarket home-appliances store Dyson, an assistant explained: “This is Dubai, and people love to shop. They do not care about 5 percent, but it might be different when goods go back to full price later this month.”
The festive season coincides with the month-long Dubai Shopping Festival (DSF), when retailers encourage sales by offering big discounts — up to 40 percent — off normal prices. The impact of VAT would become more apparent after this promotional period closes at the end of January, the assistant explained.
But Dubai Mall, run by the real estate developer Emaar, was as hectic as usual on New Year’s Day. By early afternoon, parking in the Fashion Avenue sector could only be had on the ninth floor of the huge car park, and as the afternoon wore on the mall became increasingly packed.
Some retailers had foreseen a dampening of demand because of the VAT rise, and were willing to offer discounts to offset the new sales tax. In the LG electronics shop, a new top-of-the-range line of mobiles came with a discount of around 10 percent. The store was busy, but not packed.
It was a different story across the walkway in Sharaf DG, where the new iPhone X was on sale at 4,965 dirhams ($1,352), compared to a price of 4,729 dirhams on New Year’s Eve. Haggling for a discount to compensate for the VAT rise was counterproductive.
“We can sell the new phone for top price,” the assistant explained. He did, however, offer a significant discount on the less popular iPhone 8.
In the Kinokuniya bookshop, a receipt for two books totalling 168 dirhams was headed “tax invoice,” and had a separate line for “VAT inclusive 5 percent”, totalling 8 dirhams. “Everybody is asking for the receipt. Maybe they want it as a souvenir,” the counter assistant joked.
The bookshop, the biggest in the UAE and one of the most popular in the Middle East, appeared to be doing a brisk trade, with families prominent among shoppers.
Some stores selling goods that might be considered for VAT exemption — like the Ortopedia children’s shoe store selling specialist footwear — had already increased prices by 5 percent. “There were a lot of people buying yesterday ahead of the increase,” the assistant said.
Some foodstuffs are also VAT exempt in the UAE, but that does not extend to food regarded as falling under the category of “discretionary spending.” A bag of cheese crisps in a mini-market in the mall was unchanged in price at 2.50 dirhams, but the receipt showed that included 13 fils as VAT. The store had declined to impose the full charge of 2.63 dirhams, which in any case would have been difficult to pay given the lack of coinage at such small denominations.
The shrewd shopper could even pick up huge bargains, regardless of the new tax. In Jimmy Choo, the glitzy women’s shoe shop, the assistant explained that prices were unchanged because management was still considering the timing of passing the increase on to consumers.
So a pair of glitzy shoes with 10cm heels with gold-painted leather, and encrusted with huge stones on chains, could still be found with a price tag of 8,000 dirhams, rather than the official post-VAT price of 8,400 dirhams.
“But we’re offering a 40 percent discount during the DSF. You can have them for 4,500 dirhams,” the assistant said.