Contrary to media reports that the UAE will levy value-added tax early next year, a government official was quoted as saying that the emirate will not bring in the new tax until at least 2010.

To bring in VAT in place of import tariffs, a ’huge infrastructure’ has to be set up first and most importantly, all six GCC states have to implement the system at the same time, Saeed Khalifa Saeed Al Merri, deputy director-general of the UAE Federal Customs Authority, as quoted as saying in a Gulf News report.

The second largest Gulf economy is entering into free trade pacts with countries around the world and wants to bring in VAT in place of customs duties.

"At a time of high inflation and record oil income, it would be difficult for the UAE, or any other GCC country, to introduce a tax that will be inflationary in the first year," said Monica Malik, chief economist at EFG-Hermes Holding SAE.

Ernst & Young had said earlier that VAT may push up inflation as UAE businesses pass on the costs to consumers.