Alcohol tax in Dubai is set to return, with a 30% levy reinstated on sales starting January 1 after a two-year hiatus. The hospitality sector has been officially informed, and key suppliers like African & Eastern have confirmed receiving notifications from Dubai Municipality about this directive.
In a statement, African & Eastern expressed its commitment to supporting the decision made by the Dubai Government. They clarified that the tax’s suspension had always been temporary and on a trial basis. They are currently evaluating the implications of this change but assure customers that the process for obtaining alcohol licenses will remain unaffected. Initially suspended on January 1, 2023, the alcohol tax benefited from a second-year extension, although this was not publicly announced at the time.
Understanding the Alcohol Tax Structure
The 30% levy will be applicable to various retail channels, including Off-License shops like Maritime & Mercantile International (MMI) and African & Eastern, as well as local bars and restaurants. Importantly, businesses will pay this tax when they purchase their stock, which typically costs less than the retail prices paid by consumers. This means that the final cost of alcoholic beverages also depends on other operational expenses, such as staffing and facility costs. For context, Abu Dhabi had introduced a similar 30% alcohol tax in Off-License back in 2018.
Impact on Pricing for Consumers
As patrons speculate whether a drink that costs Dh50 at a Dubai bar will jump to Dh65 in the New Year, the reality appears less dramatic. Individual businesses’ reactions to the tax might vary, but significant price increases are unlikely. Since the tax applies to wholesalers rather than the final retail price, businesses will manage their costs accordingly. For example, if a product costs Dh15 at stock, the final price after tax would only increase by a fraction, potentially resulting in a retail price closer to Dh19.50. Industry insiders suggest that any potential price increases for alcohol may be around Dh5, rather than a full 30% surge.
Do Customers Benefit from Tax Suspension?
During the temporary tax waiver, some establishments took advantage of the opportunity to lower prices, particularly at Off-License. However, hospitality leaders noted that despite the tax relief, rising inflation and costs limited their ability to pass on savings to consumers fully. Factors such as escalating living expenses related to food and fuel have placed a strain on operational budgets. Nick Comaty, Vice President of Food and Beverage Operations at Ennismore, praised the brief tax suspension, noting its potential to significantly impact businesses positively.
He stated, “While alcohol prices are extremely high in restaurants, hotels, and bars it is not due to large margins; rather our financial margins are often tighter here than elsewhere globally.”
A Shift in Regulatory Framework
The reintroduction of the alcohol tax is part of a broader regulatory evolution in Dubai. In January 2023, the Dh270 personal alcohol license fee was eliminated. Similar licensing restrictions were lifted in Abu Dhabi back in 2020. Furthermore, substantial legal reforms have decriminalized alcohol consumption within the UAE, allowing residents aged 21 and older to enjoy alcoholic beverages responsibly in private or licensed venues.
Dubai Municipality and the Dubai Media Office have been approached for additional comments regarding these developments. This latest move marks a significant change in Dubai’s approach to alcohol regulation, offering insight into the ongoing transformation of its hospitality environment and the broader economic landscape.
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