The UAE’s rise in tax on carbonated drinks, tobacco and energy drinks, which launched on October 1st, has generated a mixed reaction from analysts and businesses involved.
The first tax on carbonated, or fizzy, drinks, will see the prices rise by 50 percent.
“I think we’ll see the sales of drinks decline dramatically,” said Colin Beaton, managing director of Limelight Creative Services, a retail strategy agency.
“Many of the consumers of soft drinks are in the lower income brackets, who will be hardest hit. Wealthier people will not mind going from Dh2 to Dh3. But people at the lower end of the economic spectrum will stop consuming these products,” he told Gulf News.
A tax of 100 percent will be placed on energy drinks, such as Red Bull, and tobacco products, basically doubling their price.
Companies are worried by the steep hike in prices that consumers will be faced.
British American Tobacco executives have complained about the lack of a phased-in approach, saying that the overnight implementation of the tax will be harmful to their business.
“We are concerned that the sudden price increase will be damaging, and that the phased approach of countries implementing the tax at different times may incentivize smuggling,” said a spokesperson from British American Tobacco.
The sales of cigars are set to be impacted, too. Hans-Kristian Hoejsgaard, CEO and president of Oettinger Davidoff AG, a cigar maker, said to Gulf News that his company was “obviously not a big fan of the tax.”
A UAE-based distributor of handling the energy drink Superman described the tax as expensive, saying that it would have a huge impact on sales, and make the product more difficult to sell.
Despite the change coming into effect, many shops and stores in the UAE have yet to pass on a new excise tax on soft drinks, energy drinks as well as tobacco products to consumers – the prices on their shelves remain the same. Perhaps they just taking their time…