The United Arab Emirates has introduced Value Added Tax (VAT) for the first time. The 5 per cent levy is being applied to the majority of goods and services. Petrol and diesel, food, clothes, utility bills and hotel rooms all now have VAT applied. But some expenditures have been exempted from the tax, including medical treatment, public transport and school fees. It is estimated that in the first year, VAT income will be around 12 billion Dirhams. <br/><br/>The Gulf state has long attracted foreign workers with the promise of tax-free living, but the government wants to increase revenue in the face of lower oil prices. Economists have estimated that VAT will increase the cost of living for residents by about 2.5 per cent.