What shapes Muslim business operators’ attitudes towards value-added tax? Evidence from the United Arab Emirates

Abstract

Purpose This study aims to examine what factors shape Muslim business operators’ attitudes towards pre- and post-value-added tax (VAT) implementation in the United Arab Emirates (UAE). Design/methodology/approach A longitudinal approach is employed to collect data from a total of 200 respondents, during both the pre-VAT implementation period and the post-VAT implementation period. A partial least squares structural equation modelling approach was performed to analyse the research. Findings Empirical findings revealed that challenges in implementing the VAT system were the primary predictors of Muslim business operators’ attitudes regarding the pre-VAT implementation period in the UAE because they were aware that the penalties associated with non-compliance would outweigh the costs incurred in preparing for the VAT. During the post-VAT implementation period, awareness was the strongest influence on Muslim business operators’ attitude because there are no income taxes imposed on businesses and individuals in the UAE. Practical implications The introduction of VAT in the UAE ignited great controversy on the part of Muslim business operators, who viewed the new tax system as a significant challenge or risk to their careers, especially when they realised that they would have to play a significant role in tax collection. VAT registration should be required for all businesses regardless of size since they are going to be the tax agents for the government. Indeed, the government should finalize policies and procedures on the penalties for non-compliance since such legalities could greatly contribute towards the acceptance of VAT. Originality/value Challenges prompted Muslim business operators to become more knowledgeable about VAT, whereas also developing a greater awareness and sense of preparedness regarding the implications of the system on their businesses. This discovery has advanced the theoretical understanding of the topic and its managerial implications.