Shisha will stay hot in UAE, taxed or not

The habit of smoking shisha is one of the major concerns for the UAE's health authority. Jaime Puebla / The National

Late on a Friday evening in Dubai Marina, the rich, sweet smell of flavoured tobacco drifts through the air.

Families, couples and groups of friends are gathered outside along the bustling strip of restaurants, drinking Moroccan tea, Turkish coffee, and smoking shisha as they chat and admire the view of expensive yachts moored on the water.

Despite plans in the pipeline to introduce a tax on tobacco that could push up prices of cigarettes and tobacco products by about 30 per cent, many smokers say that would have little effect on their smoking habits.

"Even if you make shisha Dh100 (US$27.22), nobody will stop shisha," says Fadi Alsamkari, 32, an operations and maintenance manager for an amusement centre development company in Dubai. "I spend about Dh250 a week on shisha," he says as he puffs on his shisha pipe at the Maxine Cafe Restaurant at Dubai Marina Walk. He smokes shisha everyday. "I hope they don't put a tax on though," he adds.

Restaurant owners also believe there will be little impact if the tax is introduced.

"A cultural pastime, should a tax be levied on its consumption, we do not believe its popularity will be affected," says Louis Abdilla, the managing director of Pragma Lifestyle, which has the Bo House restaurant and shisha cafe on Jumeirah Beach Residence.

"Shisha is a popular offering at Bo House for both tourists and residents alike."

Retailers are confident that there will not be a significant decrease in demand for cigarettes if the proposed levy is introduced, because smokers are already dependent on nicotine.

This is a view shared by some economists.

"Demand for cigarettes and tobacco products tends to be insensitive to price changes," says Giyas Gokkent, the chief economist at the National Bank of Abu Dhabi. "When people consume tobacco products, they get used to these. Inelastic demand for tobacco products means that taxes that are imposed are easily passed on from producers to consumers. So, consumers tend to bear the cost of a sales tax on tobacco products."

But there are conflicting views on the impact of tax on demand for cigarettes and tobacco products such as shisha.

Many are adamant there is evidence that shows significant hikes in taxes do result in a decline in demand.

"Tobacco taxes are the most effective way to reduce tobacco use, especially among young people and poor people," according to the World Health Organisation. "A tax increase that increases tobacco prices by 10 per cent decreases tobacco consumption by about 4 per cent in high-income countries and by up to 8 per cent in low and middle-income countries.

And with shisha prices at many high-end outlets ranging from Dh40 upwards, some smokers say the additional expense would be enough to put them off smoking.

"I feel that the price is already very high," says Zahi Salloum, 36, who runs an interior design company. The resident of Abu Dhabi says he tends to smoke shisha pipes for the sake of it and would not be willing to pay more.

Professor Salim Adib, the manager of public health and research at the Health Authority in Abu Dhabi, says implementing tax hikes on tobacco is an effective way of curbing smoking habits.

"Elsewhere the tactic has worked," he says. "Parliament says they would be interested in increasing prices and that would be a good idea."

About 30 per cent of men in the UAE smoke cigarettes, while about 3 per cent of women smoke, according to Prof Adib.

A rise in the price of cigarettes to about $7 has had a major affect on consumption in other parts of the world, he says.

But the use of shisha is one of the main concerns for the authority, he adds.

Additional revenues from taxation have the potential to benefit health care in the UAE, although there are challenges.

"In many countries they have increased the tax on tobacco and have found a way to channel this money back into the healthcare system," said Mr Adib.

"This will not be easy in this country, because the system is so fragmented. The mechanism does not exist to bring that money back into the healthcare system.

"We do not know how much money it would save, but elsewhere it has been used to do anti-tobacco campaigns," he says.

"It would be nice to have more money to improve tobacco cessation programmes. The costs of the treatment and education is covered for all nationals so it would be nice to have it covered for non-nationals."

Mr Gokkent describes tobacco products as "a favourite of governments around the world as target for raising revenue".

"In addition, governments have also argued that tobacco products cause significant health problems and impose costs on society and taxing these products is a way of government to generate revenue to defray future health costs."