Prices slow to change as excise tax takes effect
CONSUMERS SAY THEY WILL CUT INTAKE AND SWITCH TO CHEAPER BRANDS AS PRICES RISE
The UAE’s excise tax came into effect, but many shops still appeared to be selling products at their old prices yesterday.
The rate for the so-called sin tax is 100 per cent for cigarettes, tobacco products and energy drinks, and 50 per cent for carbonated beverages.
Some retailers had not changed their pricing to reflect the new tax because they had legal levels of stockpiles which they would need to sell first before updating their prices, said Adrienne D’Rose, a senior manager at the Indirect Tax Department at Deloitte. “The government’s stockpiling provisions are designed in part to stop people from storing stocks of excisable goods before the implementation to avoid or delay paying taxes,” D’Rose told Gulf News yesterday.
According to the UAE’s law on the excise tax, retailers are allowed to stockpile a maximum of two months’ stock of inventory according to average monthly sales.
Residents meanwhile told Gulf News they would reduce their intake of the taxed items, switch to cheaper brands or do both to offset the impact of the tax on their budgets.
R esidents said they would reduce their intake of tobacco, energy drinks and carbonated drinks and switch to cheaper brands to offset the new UAE excise tax on such products, which came into effect yesterday.
The tax rate is 100 per cent for cigarettes, tobacco products, and energy drinks, and 50 per cent for carbonated drinks. The tax aims to reduce consumption of unhealthy products and also increase the government budget for beneficial projects.
A pack of 20 cigarettes will now cost Dh20 (for leading brands), while carbonated soft drinks will cost Dh2.25 per can. Energy drinks will be priced at around Dh12, depending on the brand.
Yesterday, shops were selling a mix of old stocks at taxfree prices and new stocks at a higher price.
Residents Gulf News spoke to yesterday said they are considering cutting back consumption, switching to cheaper brands, or doing both together.
“I used to have around three energy drinks per day, besides one or two soft drinks. Today (Sunday) I’ve only had one energy drink. I don’t feel like I have any less energy. So the tax is a good thing because it keeps people away from unhealthy habits, by making them more expensive,” said Brian, a 24-year-old Nigerian expat who works in sales in Dubai.
Pakistani expat Zubair Haider, 38, who lives in Sharjah, said it was still too early to assess the impact of the tax. “This is a new thing for the UAE. Like all new things, it takes some time getting used to. But smokers will be pushed to consider quitting or switching to cheaper brands, because it will be a much bigger expense now,” said Haider, who is a marketing professional.
Ian Naria, 27, a Dubai-based barista from the Philippines, said the tax will “increase product costs but reduce health costs. It’s a good thing. I’m not really affected because I don’t smoke or have energy drinks or soft drinks; they aren’t good for you.”
Mohammad Omar Zameer, a 41-year-old British legal consultant in Dubai, said: “For those people who are used to energy drinks to keep them alert at work, especially in the morning, it’s a now a choice between feeling a certain way or paying double. Smokers will also think twice before splurging on cigarettes. Carbonated soft drinks are high in sugar content, which is not a healthy thing. I think anything that discourages these habits is a welcome move.”
In Abu Dhabi, Gulf New found a few supermarkets were replacing the old price tags with new ones on Sunday, while many had already done so overnight.
Nepalese expat Khagendra Paudyal, who visited Lulu Xpress on Zayed The First Street, said: “I generally smoke Marlboros and a 20-cigarette packet lasts me three days. But since the prices have increased, I intend to make a packet last for six days to budget my expenses.” He added that he is determined to cut down on energy drinks too while he finds an alternate product.
Abul Fazal, a Bangladesh national who visited Grandiose Stores on Muroor Road, said:
“I came to buy some cigarettes but I didn’t as the prices have increased 100 per cent from today [Sunday]. I respect the decision of the government and we abide by that. It’s in the interest of people to reduce consumption.”
Meanwhile, a lot of workers who binge on soft drinks after toiling under the sun, also plan to change their habit.
Waheed Khan, a Pakistani worker who grabbed two bottles of soft drinks from Al Safa Express supermarket on Muroor
Road, said: “As we work outdoors and sweat so much, we have soft drinks to cool off, and it gives us an immediate relaxing effect.
“Now, we will cut down its intake and instead drink chilled water.”