Monday, June 1, 2009
Dubai Government announces new pricing mechanism for Government services
Dubai, June 1, 2009: The Department of Finance, Government of Dubai, announced today that it has begun to implement the requirements of the Royal Decree issued by His Highness Sheikh Mohammed Bin Rashid Al Maktoum, Vice President and Prime Minister of the UAE and Ruler of Dubai, regarding the review and reduction of Government service fees.
In line with this initiative, the Government of Dubai will shortly introduce a new pricing mechanism for such services, which has been developed on a scientific basis by the Department of Finance to further enhance the competitiveness of the emirate and its attractiveness as an investment destination. This new system, which is unique among non-tax nations globally, will provide fee payers with the modern and diversified payment facilities, including through installment payments.
The Department of Finance, in coordination with all relevant Government departments, has identified opportunities to reduce fees by an average of 20-30 per cent. The specific fee reductions in this regard will be announced shortly.
His Excellency Abdul Rahman Al Saleh, Director-General of the Department of Finance, said that the service fees that will be reduced under the new fee structure include:
Registration of lease-to-own contracts Land Department
Extension of the term of mortgage payments Land Department
Termination of lease-to-own contracts Land Department
Valuation of property (without land) Land Department
Issuance of property ownership certificates Land Department
Issuance of license to convert property to hotel/apartments Dubai Municipality
Service improvements Dubai Municipality
Analysis of food samples Dubai Municipality
Engineering tests Dubai Municipality
Professional career tests Dubai Municipality
License and annual appropriations for food activities Dubai Municipality
Exploitation of allocated desert areas for tourism Dubai Municipality
All building adjustments Dubai Municipality
Special adjustments of villas and homes Dubai Municipality
Regular adjustments of villa and building complexes investment - industrial - entertainment Dubai Municipality
Medium adjustments of villas and building complexes investment - industrial - entertainment Dubai Municipality
Major adjustments of villas and building complexes investment - industrial – entertainment Dubai Municipality
Issuance of discount and promotional campaign licenses DED
Issuance of business and occupation licenses DED
Registration of occupation licenses DED
Registration of business licenses DED
Renewal of business and occupation licenses DED
The Director-General of the Department of Finance added that, in line with the decree by His Highness Sheikh Mohammed Bin Rashid Al Maktoum, the costs associated with all Government services will be reviewed in terms of fees, prices and specific tariffs. The pricing mechanism for Government services will be applied as the basis for the review process, which will in no case lead to an increase in fees, further supporting His Highness Sheikh Mohammed Bin Rashid Al Maktoum’s vision of enhanced economic competitiveness.
The Director-General of the Department of Finance said: “His Highness Sheikh Mohammed Bin Rashid Al Maktoum has stressed very clearly that the imposition of any new charges will be limited to one instance, which is the development of new services that have been deemed necessary and beneficial to the community. The pricing of any such service will be updated according to the pricing mechanism adopted.”
Regarding the nature and advantages of the Government services pricing mechanism, developed under the guidance of His Highness Sheikh Mohammed Bin Rashid Al Maktoum, the Director-General of the Department of Finance said that this mechanism is a unique achievement by the Government of Dubai, not only across the region but also among all non-tax nations worldwide.
Abdul Rahman Al Saleh added that tax-imposing countries generally determine such service fees based on the actual cost to government. Other countries, including both tax and non-tax states, base such fees on cost estimates.
This can lead to two possible outcomes: first, either such fees are higher than required, leading to additional burdens on individuals and institutions, which can create a negative impact on incomes and economic competitiveness. In the second instance, such fees will be lower than required, leading to additional burdens on the government budget, hindering the process of providing and enhancing government services.
Al Saleh said that the Dubai Government’s new pricing mechanism is unique insofar as it based on the revenue policy of the Government. This policy is based on the principle of fairness in pricing Government services. Accordingly, Government services have been identified as belonging to four categories:
1. Public services that are available for all and from which no one can be excluded from their benefits, such as public security, infrastructure, environmental protection, etc. Worldwide, governments typically finance such services through tax revenues. In Dubai and the United Arab Emirates, these services are financed from other sources, such as oil revenues, profits of Government investments, etc.
2. Regulatory and administrative services that are essential to the regulation and authentification of general social and economic activities, such as issuing permits, licenses and all types of visas, in addition to registration records, birth certificates, ownership titles, etc. All the charges and fees of these administrative services are based on the fair cost and benefit to the individual.
The concept of fair cost is a unique advantage in the pricing mechanism that has been developed by the Dubai Government. It requires calculating the cost to be paid by the individual, even if it less than the actual cost to the Government for the same service. This means that the fair cost may be less than the actual cost by up to 30 per cent.
The benefits in this instance have been defined as limited to the private benefits obtained by the applicant upon receipt of the license, permit or registration, without considering the significant additional benefits that result from the use of the license, permit or registration.
3. Competitive economic services: services provided by the Government and the private sector, including medical, educational and other services. This type of service is priced on the basis of market prices. In this instance, the Government ensures that the price of such competitive services is not higher than market price, as the market price is assumed to be moderate because of competition. Such fees must also not be less than market prices so as not to weaken the private sector. The Government is committed to maintaining market prices, even if the cost of such services is higher than the market price.
4. Non-competitive economic services: services of an economic and investment nature that are not subject to competition from various points of delivery, such as electricity, water, public transportation, sanitation, public car parking, etc. Tariffs for these services are determined on the basis of economic cost in line with global standards.
Al Saleh concluded: “The pricing mechanism approved by His Highness Sheikh Mohammed Bin Rashid Al Maktoum conforms with his vision to promote competitiveness and is based on modern scientific foundations, rather than speculation. The positive effects of the application of this mechanism will become clear in the coming months following the implementation of the comprehensive review initiated by the Department of Finance.”