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Mon 25 Nov 2019 04:52 PM

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Excise tax is really an opportunity for UAE retailers

The legislation has the potential to open up far more opportunities than it closes, and therefore shouldn't be something that the retail industry is resistant to, writes Mohammad A. Baker, Deputy Chairman & CEO of Gulf Marketing Group

Excise tax is really an opportunity for UAE retailers

Mohammad A. Baker, Deputy Chairman & CEO of Gulf Marketing Group

From December 1, the UAE’s extended excise tax on sugary drinks and new tax on vaping fluid and e-cigarettes will come into play.

While the increase in prices has consumers – and potentially some retailers – concerned, the truth is that increasing the cost of non-essentials that have negative health or environmental impacts has benefits; for individuals, governments, and businesses alike.

Speaking from my perspective in the retail industry, the legislation has the potential to open up far more opportunities than it closes, and therefore shouldn’t be something that we as an industry are resistant to.

Of course, the initial public reaction to the current excise tax (introduced in 2017) was mixed. This is understandable. Most of us are often resistant to change, especially when it impacts our wallets. However, the excise tax was intended to have life-changing results in the long-run.

One of the reasons it was introduced in the UAE was as a means of building a healthier society by curbing consumption of added-sugar beverages such as soda, energy drinks, and tobacco products.

And the need was pressing. Statistics suggest that non-communicable diseases such as cardiovascular diseases and diabetes are responsible for almost three in every four deaths in the UAE. There are known links between the consumption of products that fall within the excise tax bracket and these diseases. Reducing the appeal of associated products should contribute to fewer instances of non-communicable diseases down the line.

With that in mind, community health is something that the leadership in this country is taking very seriously. The fact is that healthy populations live longer, are more productive, and save more. With government support, this philosophy has been embraced on a much larger scale in the UAE in recent years.

The success of this month’s Dubai Fitness Challenge is just one example of where we are heading. The initiative has grown tremendously year on year, with businesses in particular acknowledging that the society is more health-conscious than ever before. It is an area where consumers are investing more of their time — and their dirhams. 

Within the retail community, the new excise tax thus offers us the chance to advance public health while also ushering in more favorable and lucrative product categories.

An increased excise tax does not have to mean loss of business. Rather than being concerned over the potential loss of revenue from legacy fast-moving products, the retail industry is now given a stronger business case to turn its sights towards promoting alternatives. Exploring healthier products and emerging categories has never made more business sense. That decision will not only be better for public health, but is good for the UAE’s long-term economic success.

Mohammad A. Baker, Deputy Chairman & CEO of Gulf Marketing Group