Cigar traders are bracing themselves for an uncertain financial future as tobacco products become subject to a 100 per cent tax from October 1.
Luxury brands from Costa Rica and Cuba are likely to double in price, with the most expensive cigars set to cost more than Dh700 for a single smoke.
The final quarter of the financial year will see the UAE implement a 100 per cent excise tax on tobacco products, following the lead from Saudi Arabia that introduced the same rate in June.
While cigarettes will also double in price, they will remain affordable and doctors have questioned if the price hike will be enough to deter long-term smokers.
Cigars, often sold as singular products, could be more vulnerable to market forces as they are a more expensive form of smoking.
One UAE Cuban cigar distributor, who did not want to be named, said the cigar culture will diminish and could be killed off overnight.
“With a 100 per cent price increase on cigars, the UAE will become the most expensive country in the world to smoke [them],” he claimed.
“The industry is not as established as in other countries, so it would be hard to survive. Cigars should not be subject to the same tax as cigarettes, as they are very different products.”
Marketed as a luxury product, and a sign of success and status, cigars go hand-in-hand with high-end whisky, though the latter will escape similar taxation.
Top hotels in Dubai and Abu Dhabi have tapped into that culture, by opening specific cigar bars to serve demand.
Conversely, the price rise in the UAE and across the GCC could see a boom in trade at duty free zones in airports around the world, the cigar trader said.
“There are a lot of assumptions being made, and that has led to a lot of stockpiling of tobacco products,” he said. “People are buying cigars to fill up their humidors.
“In the UAE, hotels will take a 200 per cent margin on the resale price of cigars, while smoking centres will take a 40 per cent margin – so it is a difficult industry for us.
“Duty free is the area which will suddenly have the most focus. If cigars double in price, people will think twice.”
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Entry-level cigars can cost as little as Dh10, with more expensive brands such as the 400 zinc platinum retailing for Dh200 and the El Septimo cigar from Costa Rica one of the most expensive at Dh350.
In hotel cigar bars, the price is even steeper – even before the new tobacco tax is applied.
At the Dukes Hotel Cigar and Whisky Lounge on The Palm, the cheapest cigars on offer are an Dh80 Hoyo De Monterrey Petit Robusto, followed by Dh90 for a Monte Cristo number 4.
The most expensive is a Dh235 Arturo Fuente Anejo, shark number 77. All are expected to double in price.
“We sell the cigars individually, rather than in packets, so I’m not sure yet what the pricing structure will be with the new tax rules,” said Elizabeth Mburu, a cigar lounge waitress at Dukes Hotel.
“Most days we sell between 1 and 3 a day but on weekends or during the holidays we sell more, maybe 7 or 8 in a day.
“Tourists want to try new things – they are luxury items so people will still want to spend the money.
“The price has not been a problem up to now, although they are expensive, but that could change.”
While occasional cigar users may be subject to less of the associated health problems of long-term cigarette smokers, they are still at risk from cancer-causing chemicals.
All tobacco smokers are vulnerable to lung and heart disease, as well as oral cancers.
A single full-size cigar can contain nearly as much nicotine as a pack of 20 cigarettes.
Even if the smoke is not inhaled, large amounts of nicotine can be absorbed through the mouth.
Second-hand smoke from cigars can also cause or contribute to lung cancer and heart disease, and increases the risk and severity of childhood asthma, ear infections and upper and lower respiratory infections.
Noufal, a specialist cigar salesman at Smokers Centre in the Mall of the Emirates, is expecting the tax to cost him customers.
“Of course, we are concerned about how the new tax could affect our profits,” he said.
“Some of our cigars are already expensive, so for them to double in price could be a big problem for us.
“It is a luxury item but our most expensive individual cigars will be about Dh700 with the new added tax.
“There is a real concern we will lose a lot of business, and there is uncertainty about what will happen in future as occasional smokers may be priced out of the market altogether.”
PROFILE OF CURE.FIT
Started: July 2016
Founders: Mukesh Bansal and Ankit Nagori
Based: Bangalore, India
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Size: 500 employees
Investment: $250 million
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How has net migration to UK changed?
The figure was broadly flat immediately before the Covid-19 pandemic, standing at 216,000 in the year to June 2018 and 224,000 in the year to June 2019.
It then dropped to an estimated 111,000 in the year to June 2020 when restrictions introduced during the pandemic limited travel and movement.
The total rose to 254,000 in the year to June 2021, followed by steep jumps to 634,000 in the year to June 2022 and 906,000 in the year to June 2023.
The latest available figure of 728,000 for the 12 months to June 2024 suggests levels are starting to decrease.
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Mercer, the investment consulting arm of US services company Marsh & McLennan, expects its wealth division to at least double its assets under management (AUM) in the Middle East as wealth in the region continues to grow despite economic headwinds, a company official said.
Mercer Wealth, which globally has $160 billion in AUM, plans to boost its AUM in the region to $2-$3bn in the next 2-3 years from the present $1bn, said Yasir AbuShaban, a Dubai-based principal with Mercer Wealth.
“Within the next two to three years, we are looking at reaching $2 to $3 billion as a conservative estimate and we do see an opportunity to do so,” said Mr AbuShaban.
Mercer does not directly make investments, but allocates clients’ money they have discretion to, to professional asset managers. They also provide advice to clients.
“We have buying power. We can negotiate on their (client’s) behalf with asset managers to provide them lower fees than they otherwise would have to get on their own,” he added.
Mercer Wealth’s clients include sovereign wealth funds, family offices, and insurance companies among others.
From its office in Dubai, Mercer also looks after Africa, India and Turkey, where they also see opportunity for growth.
Wealth creation in Middle East and Africa (MEA) grew 8.5 per cent to $8.1 trillion last year from $7.5tn in 2015, higher than last year’s global average of 6 per cent and the second-highest growth in a region after Asia-Pacific which grew 9.9 per cent, according to consultancy Boston Consulting Group (BCG). In the region, where wealth grew just 1.9 per cent in 2015 compared with 2014, a pickup in oil prices has helped in wealth generation.
BCG is forecasting MEA wealth will rise to $12tn by 2021, growing at an annual average of 8 per cent.
Drivers of wealth generation in the region will be split evenly between new wealth creation and growth of performance of existing assets, according to BCG.
Another general trend in the region is clients’ looking for a comprehensive approach to investing, according to Mr AbuShaban.
“Institutional investors or some of the families are seeing a slowdown in the available capital they have to invest and in that sense they are looking at optimizing the way they manage their portfolios and making sure they are not investing haphazardly and different parts of their investment are working together,” said Mr AbuShaban.
Some clients also have a higher appetite for risk, given the low interest-rate environment that does not provide enough yield for some institutional investors. These clients are keen to invest in illiquid assets, such as private equity and infrastructure.
“What we have seen is a desire for higher returns in what has been a low-return environment specifically in various fixed income or bonds,” he said.
“In this environment, we have seen a de facto increase in the risk that clients are taking in things like illiquid investments, private equity investments, infrastructure and private debt, those kind of investments were higher illiquidity results in incrementally higher returns.”
The Abu Dhabi Investment Authority, one of the largest sovereign wealth funds, said in its 2016 report that has gradually increased its exposure in direct private equity and private credit transactions, mainly in Asian markets and especially in China and India. The authority’s private equity department focused on structured equities owing to “their defensive characteristics.”
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Power: 153hp at 6,000rpm
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Install an air filter in your home.
Close your windows and turn on the AC.
Shower or bath after being outside.
Wear a face mask.
Stay indoors when conditions are particularly poor.
If driving, turn your engine off when stationary.
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