Complex Made Simple

UAE residents love excise tax, think it’s “Smoking”!

We keep hearing of how the 5% VAT is really irking UAE residents.

They think it’s confusing, and often not applied in a proper way.

The much more expensive Excise Tax, ranging from 50-100% is having a different effect on some people.

Especially the ones who were charged 100% are ecstatic!  It’s making them live longer.

Have they lost their minds?

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Health is precious

The 100% excise tax on tobacco, which started in the UAE on October 1, 2017, created a few concerns among some citizens but it surely created a motivation for other people to consider quitting smoking.

“UAE will enforce 100% per cent tax on cigarettes and energy drinks. Pleased to hear this,” one resident tweeted before the decree came into effect.

Another resident even asked for more: “Thank you for raising the prices of Colas and Cigarettes. It may still not eradicate them…”

“Cheap cigarettes in UAE bring a high cost to health my doctor says,” another one tweeted.

Has their lifelong battle to quit smoking been cured by a tax?

Money talks

The Cleveland Clinic in Abu Dhabi and the Dubai Health Authority reported that Cessation programmes have seen a spike in the number of smokers looking to give up cigarettes in the first weeks of the New Year.

The clinics have reported an increase in the quitting rate of its smoking patients to 16%.

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A surge in the numbers of smokers looking to quit in 2018 has been attributed by doctors to the high price of cigarettes following last year’s introduction of a tax on tobacco, according to media reports.

“Patients are reporting that pressure from other family members, health concerns and rising costs are among the most common reasons prompting them to seek help quitting,” Iyaad Hasan, a certified tobacco treatment specialist who leads the Cleveland Clinic program in Abu Dhabi, was quoted as saying.

“Tobacco taxes are the most cost-effective way to reduce tobacco use, especially among young and poor people. A tax increase that increases tobacco prices by 10% decreases tobacco consumption by about 4% in high-income countries and about 5% in low- and middle-income countries,” said the World Health Organization in a statement.

People are healthier, but is the UAE government wealthier?

Government benefits

“Excise tax diversifies the government’s revenue streams and boosts its resources, which, in turn, will strengthen the economy and ensure its sustainability,” said Sheikh Hamdan bin Rashid Al Maktoum, Deputy Ruler of Dubai, UAE Minister of Finance, and Chairman of the Federal Tax Authority, when issuing the excise tax in august.

However, the idea is not to make money at the cost of people’s health.

Rather the opposite.

“This tax is set to discourage the consumption of products that negatively impact the environment and, more importantly, people’s health, while the revenues it generates will go towards supporting advanced services for all members of society,” Sheikh Hamdan added.

Good news for the government. Too bad for businesses?

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Lower trade

Abu Dhabi’s trade in raw tobacco saw a steep decline in the run-up to the introduction of excise tax on tobacco products.

The total value of the tobacco trade slipped $18 million during the first nine months of 2017, according to the Statistics Centre on non-oil trade movement.

The emirate’s tobacco imports also dwindled to a total value of $817,000 in the first nine months of the year, compared to $2.3m in trade during the same period in 2016, as exports remained low.

When criminals see this, they tend to find illegal solutions.

An Interpol director said the increase in tobacco tax is likely to result in a rise in tobacco smuggling.

“Criminals take advantage by offering illegal tobacco at a discounted price, leading to ­illicit trade and smuggling of cigarettes into the country,” Michael Ellis, now a risk management consultant, told media.

This region’s love for tobacco is not an easy thing to abandon.

Egyptians seem to hold this habit dearly to their hearts even at the cost of cardio malfunctions.

For the love of Tobacco

Bloomberg revealed recently that demand on cigarettes among Egyptians increased despite record levels of inflation.

It said that shares of Cairo-based Eastern Tobacco, which holds a monopoly on cigarette production in Egypt, have hit successive record highs.

“Historically, people don’t stop smoking,” said Ahmed Hafez, the co-head of research at HC Brokerage in Cairo.

“We haven’t seen a prolonged impact on demand since price increases.”