Vice president and prime minister of the UAE and ruler of Dubai Sheikh Mohammed bin Rashid al Moktoum, chairing a meeting of the cabinet on Sunday, said the cash would go towards improving local services and community development.

The remaining 30% would go into the federal budget, it was decided.

“We have decided to distribute value added tax revenues in the UAE so that local governments will receive 70% of these revenues to achieve better local services, greater community development, and wider support for our citizens,” Sheikh Mohammed continued.

The UAE and Dubai introduced a 5% VAT as of 1 January 2018 to boost non-oil revenue and narrow the fiscal deficit caused by the fall in oil prices.

Some sectors have avoided the tax, such as health, education and transport sectors, and VAT also has not been imposed on international aviation.

The introduction of the VAT is part of the economic reform programme in the kingdom, set out by crown prince Mohammed bin Salman.