How does Dubai make money?

The world's super rich are now packing their bags, and their new address is – Dubai. Another name has been added to this list of Indian-origin British billionaire Lakshmi Mittal. Mittal is preparing to leave Britain and settle in Dubai. Mittal is the owner of ArcelorMittal, the world's second largest steel company, and is one of Britain's richest people. But the question is, what has suddenly happened that such a big businessman has to leave his decades old base?

The answer to this is heavy taxes, in fact, the new government of Britain's Labor Party is preparing to increase the wealth tax on 'super rich' people. The government's direct objective is to handle the declining economy, for which it is aiming to raise about 20 billion pounds (about Rs 2.3 lakh crore) from high-net-worth individuals.

This proposed tax increase has made rich businessmen feel insecure. Not only this, the government has also increased the capital gains tax from 10% to 14% from April 2025 and plans to take it to 18% in 2026. But, the biggest concern of the rich is 'inheritance tax', which is up to 40% in Britain. This means that this heavy tax may also be imposed on their global assets. This is where the shine of Dubai begins, where this inheritance tax is zero.

Double blow for the rich in Britain

In the coming days, Britain's Finance Minister Rachel Reeves is going to present her first budget, and there is talk that an 'exit tax' of up to 20% may be imposed in it. Imagine, even after leaving the country, you will have to give a large part of your property to the government. Such unstable policies are forcing big industrialists to leave the country.

Not only Mittal, many big names like Revolut co-founder Nick Storonsky and Indian-origin Herman Narula have already left Britain and moved to the United Arab Emirates (UAE). A major reason for this is the abolition of 'Non-Dom Status'. This was a 200-year-old system, under which the foreign rich had to pay tax only on the income earned in Britain. As this relief ends, the UK is now less attractive to high-net-worth individuals.

How do tax-free countries spend their money?

Now the question arises here that how do Middle East countries like UAE, Qatar, where there is no tax on personal income, manage their expenses? The simple answer is natural resources.

The mainstay of the economy of these countries is the huge reserves of oil and gas. They get so much revenue from the export of these resources that they do not need to impose income tax on the salaries of common citizens. With this income, governments build infrastructure, give subsidies to citizens and meet their expenses.

However, it would not be correct to call these countries completely 'tax-free'. These governments raise revenue from indirect taxes such as value added tax (VAT), corporate tax and excise duty. That is, tax is levied on companies and goods, but not on the salary of an individual. This model makes these countries a 'magnet' for foreign investment and professionals from all over the world.

Heavy burden of 'lifestyle' on tax free

Chartered accountant Nitin Kaushik has highlighted the other aspect of this 'Dubai Dream'. He tells that although the tax on your income is zero, but living in Dubai is very expensive.

While in a city like Mumbai, a good 1BHK flat is available for ₹ 40,000-70,000 per month, in Dubai its rent ranges from ₹ 1.5 lakh to ₹ 3 lakh. Everyday items, like milk, can cost up to ₹120 per liter and a monthly metro pass can cost up to ₹8,500. That is, the saving in tax is often spent on this 'lifestyle tax' i.e. expensive living.

Apart from this, job security is also a big challenge. There are no strict labor laws there like in India. Kaushik explains that if you lose your job, your visa also expires, and you have only 30 to 60 days to find a new job or leave the country. Many companies carry out large number of layoffs without giving notice, where employees do not get any special legal protection.

Meaning, other 'tax-free' countries like Monaco, Bermuda or Bahamas are also counted among the most expensive cities in the world. Therefore, this 'tax-free paradise' is beneficial only for the rich who already have a lot of money and strong networks. For an ordinary professional, it is important to understand the risks hidden behind the glamor of Dubai.