The Impact of Tax-Free Zones in the UAE

Paper Summary:

The paper deals with free economic zones introduced by the United Arab Emirates designed to attract foreign investment in the region by providing various tax benefits. The paper assesses the effects on the economy at a local and national level and isolates any negative effects. It also presents a strategy to reduce any negative outcomes in future free economic zone development.

Outline:
Introduction
Rationale
Aims and Objectives
Methodology and Theoretical Approaches
Plan of Action
Resource Requirements
Ethical Consideration

From the Paper:

"After the success of the Jebel Ali Free-trade Zone, high demand has led to the creation of further zones with equal or better benefits provided. For example, in 1990 the Dubai Internet City and the Dubai Media City were created offering an initial period of fifty tax-free years, and the extra benefit of there being no restrictions on sponsorship or partnership for the investors in the area. This, along with the advantages of the technical infrastructure, have led to a number of leading international companies such as Microsoft, McGraw-Hill and CNN moving to this zone. The Dubai International Financial Centre (DIFC) was created later, in 2004, offering similar benefits to the previous trade-free zones, although this time aimed at financial companies. The manner in which the trade-free zone enables financial companies to gain a permanent foothold within the region is expected to strengthen the economic activities of not only the UAE, but the Middle East as a whole. In this region there are also no restraints as to how long the companies can remain under the tax benefits available, making investment in this area highly lucrative for international financial companies. "

Sample of Sources Used:

• Banoff, S.I. and Kanter, B.W. (1994) States compete to save taxes owed to other states. Journal of Taxation, 80(3), pp. 382-384.
• Christiansen, H. and Bohmer, A. (2005) Incentives and free zones in the MENA region: A preliminary stocktaking. MENA-OECD Investment Program, Paris, 29 August 2005.
• Palan, R. (2002) Tax havens and the commercialization of state sovereignty. International Organization, 56, 1, pp. 151-176.
• Tahir, J. (1998) "An assessment of free economic zones (FEZs) in Arab countries: Performance and main features." Working Paper, presented at New Economic Developments and Their Impact on Arab Economies, Tunis, 3 June 1998.

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