E-Commerce Challenges in the United Arab Emirates

Subject: E-Commerce
Pages: 6
Words: 1791
Reading time:
7 min
Study level: PhD


As much as there is a vast array of e-commerce definitions, it is generally delineated to refer to “the transaction of services as well as goods via the internet.” It encompasses business transactions in terms of business to end-users or business to business. This paper tries to illustrate the challenges as well as the escalation and the progress which e-commerce encounters in the United Arab Emirates.

Being the modern method of supervising, performing as well as carrying out matters relating to business via contemporary information technology, e-commerce is evidently expanding at a very rapid rate. The key constraints of trade are in fact, being remodeled courtesy of this innovative phenomenon. In a historical context, e-commerce has been around for slightly over two decades, albeit in diverse forms. A renewed sense of dynamism has been injected into e-commerce. This is the internet. It has further enhanced the popularity of e-commerce. The World Trade Organization has acknowledged six vital e-commerce related instruments which are the television, fax, telephone, money transfer schemes as well as electronic payments, electronic data interchange, and finally the internet.

The prospective of the expansion of e-commerce in the United Arab Emirates is markedly extraordinary. Conversely, in a nation, several challenges and hurdles abound that impinge on the expansion as well as exceptional results of e-commerce. According to Doenberg (1999), development is affected by the given investment climate created by macro-economic policies and economic governance. But another important factor that plays a pivotal role in influencing the growth is the quality of infrastructure. The quality of a nation’s infrastructure immensely manipulates augmentation. For the United Arab Emirates, it achieves substantial significance and at the same time within the speculation climate, poses numerous challenges.

The role of infrastructure

Beneath the rubric of infrastructure is an assortment of characteristics. Some of the key aspects are water supply, electricity, telecommunication services as well as the nation’s transportation services. These characteristics are all vital expansion movers although, regarding the current position of expansion in (ICT) – information and communication technologies, telecommunication attains unique significance.

Information Communication Technology

ICT use has turned out to be immeasurable within the field of business globally among the consumer populace and it perks up the wellbeing as well as the fiscal performance. One activity that has produced modern aspects in the expansion of the economy is e-commerce. It has helped several nations to achieve an advanced level of expansion in the last few years, in so doing generating a favorable investment environment for supplementary fiscal development.


A sturdy connection exists between the pointers of the investment environment and production. The World Bank survey study reveals that the firms in states having good investment climates have been investing more and the total performance of these states has been better than in the poor investment climate states (Ghislain, 2004, p. 387).

Nevertheless, the current dimensions of e-commerce are way beneath the levels realized in the United States of America. Additionally, the expected levels of achievement in the United Arab Emirates are much higher than the current e-commerce volumes. The general perception of income tax procedures and authority has been largely influenced by the rapid expansion of the e-commerce sector. Modes of carrying out business have also been modified or affected by these developments which have immensely manipulated business potential. Ghislain’s (2004) study revealed the following:

In view of the importance of e-commerce in economic development in the UAE, it is important to have a proper understanding of the tax policy and tax governance relative to e-commerce, both in the short and medium-term. In doing so, it is useful to analyze the economic implications of taxation/non-taxation of e-commerce (p. 387-401).

The matter of how the soaring of e-commerce may influence the appropriateness of diverse practices as well as impressions within the established tax systems and the long-term general fiscal expansion is one of significance that ought not to be overlooked and should be carefully scrutinized. Doenberg (1999) stated that:

In general, the following principles of taxation have been enunciated: Equity, neutrality, productivity, certainty and simplicity. Equity requires similar treatment between e-commerce and the traditional commerce. Viewed from equity, therefore, there is no case for exempting e-commerce from tax. A differential tax treatment must not be adopted as it offers an easy tax avoidance mechanism and creates administrative complexity. What is crucial is that e-commerce represents a fast growing base, which no country can afford to exclude from the tax net. It is therefore important that all persons engaged in e-commerce should be subject to the same tax treatment as meted out to traditional commerce.

However there could be many challenges expected for enforcement of transactions related to e-commerce. These are anonymity of identity and location of parties, anonymity of transactions and accounts, disintermediation, transfer pricing issues, online delivery and net cash, easy access to tax havens and low tax jurisdictions, identification of taxing jurisdiction, new evasion opportunities, recovery of tax, piracy and exchange of information (p. 87).

E-commerce and the legislation

In as much as the Information Ministry of the United Arab Emirates has taken considerable leaps and bounds in a bid to diminish imitation and piracy which is done by corporate as well as end-users, the Copyright Law No. 40 (1992) of the United Arab Emirates downplayed to some extent, the meticulous aspects brought forth by piracy via the internet since they had not predicted them. Consequently, the laws of evidence, e-commerce, and varied drafts of the replica laws were outlined.

Apparently, an outline of the law on cybercrime is under review with regards to electronic signatures, along with express indication to the Singapore Electronic Transactions Act. As such, the United Arab Emirates authorities have started taking action. Meticulously, a brand-new law was in the recent past carried out in Dubai that is pertinent to checking criminal procedures using computers. Wilkie (2004), observed that:

Under this new law, Dubai Law No. five of 2001, states, those documents with electronic signatures will be admissible as evidence in criminal investigations. The provisions of the law acknowledge signatures of individuals acquired through computers and other means of information technology for purposes of proof in criminal cases (pp. 537-539).

It has been recognized that whatever type of a commercial decree on electronics is ultimately ratified, it will be of significance to everyone. A scheme for a “cyber bylaw” has already been put into consideration by the authorities. Dubai’s Emirate particularly, has been dynamically active in this lawmaking efforts. The Government of USA (1998) observed the following:

According to a Ministry of Justice and Islamic Affairs official, the law would contain two categories to handle crimes committed on the Internet. One would be a set of laws on digital signatures and issues related to signing and forgery of electronic documents. The other set would address crimes such as hacking, using credit card numbers without the owner’s consent, invasion of privacy, copyright violations and online theft. The articles would be flexible to allow amendments to cover situations arising from newer developments in information technology. The official also said that establishing rules for evidence in cyber crime is one main difficulty in formulating cyber laws (p. 43).

The fundamentals within the on-hand Law of Evidence which has been earlier mentioned will make it precarious to communicate, sell, buy, transact or even acknowledge any advance payments or payment via electronic resources. Since the Law of Evidence of the United Arab Emirates does not acknowledge an electronic signature as it does not bear an individual’s writing, documents will be deemed not signed. According to Timmers (2000), any document issued or transacted electronically may be considered as a copy or even draft and unsigned and therefore cannot be stamped as evidence as there is no original to compare it to. Without any decree that regulates and gives value to these signatures and the attached documents, they will thus be considered unstamped and unsigned outlines. It has been stated that telegrams are valid only if the original copy is signed. Bhatnagar’s (2004), research revealed that:

Thus, electronic documents will not be regarded as good evidence. The problem lies in either proving that transactions have occurred or in establishing evidence. In addition, problems arise in cases where a party denies the validity of documents. There is no legal uncertainty if both parties recognize the contract and admit the same. In other words, if both parties agree with the terms and conditions of a contract transacted electronically and recognize the same, the question of proof does not arise. The contract therefore will be a valid contract and both parties will have to adhere to the agreement they have made through electronic means since each has recognized this contract. In other words, if both parties accept the terms and conditions, whether orally or electronically, there will be no legal issue. The problem occurs when one party defaults, or if fraud occurs, as then, the question arises and evidence of proof must be established. Therefore if there has been an agreement and both parties agreed to the terms and conditions – even if the trade was electronically conducted – then the question of proof will not arise (p. 68-70).

On the other hand, as a practical resolution to this predicament, the judiciary of the United Arab Emirates may consent to the legitimacy of very unambiguous as well as decisive stipulations and conditions which may be incorporated into their agreements to set out the way that they consent to contract.

By liberalizing the telecom quarter in the United Arab Emirates, the country has witnessed an amalgamation of information, computers as well as telecommunication thus making it unanimously inexpensive and accessible. With the IT revolution, Schneider (2004) observed that “there is constant and continual technological convergence. UAE is witnessing a change never seen before. The change and pace of growth is dynamic ranging from basic telephony to voice and data services, and bandwidth on demand to virtual private networks” (p. 117). It is necessary for the telecommunications sector to keep up its tempo to survive as well as grow due to the high-speed track revolution in information technology specifically the broadening of the internet.


Conversely, e-commerce has the impressive aptitude to reinstate the phenomenon of expansion. To scrutinize ways in which this aptitude may be realized, a wider scope encompassing ICT and way beyond e-commerce would have to be explored as ICT is the exclusive case transformative aspect for encouraging expansion in a nation. The study reveals the fact that the use of ICT in e-governance alters the mode of service offered to the population by the authorities. It reveals that the system of e-governance augments the efficacy of services the government proffers to the general population as carried out by the United Arab Emirates.


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  2. Doenberg, R. (1999). Electronic commerce and international taxation. London: Kluwer Law International.
  3. Ghislain, J. (2004). Electronic commerce and the United Nations model double taxation convention. International Tax Review, Vol. 32(8-9) , pp. 387-401.
  4. Government of USA. (1998). National taskforce on information technology and software development. New Delhi: National Information Center.
  5. Schneider, G. (2004). Electronic commerce. Pennysylvania: Course Technology.
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  7. Wilkie, S. (2004). Introduction to the special issue on telecommunications. Journal of Public Economics Theory, Vol. 6(4) , pp. 537-539.