Cigar traders fear new tax rules could price them out of business

Price of single cigars from Cuba and Costa Rica could rise to as much as Dh700 when new 100 per cent tobacco tax is applied


Cigarettes in a local supermarket.

Cigarettes, energy and soft drinks are going to be expensive as the UAE is all set to implement Excise Tax on October 1, 2017.

The Federal Tax Authority on Wednesday announced that the authority is all set to implement Excise Tax in the country from next week. 

On October 1, the excise tax will go into effect at a rate of 100 per cent on tobacco and energy drinks that include stimulants or substances that induce mental or physical stimulation, such as caffeine, taurine, ginseng and gaurana. The tax also will go into effect on soft drinks, at a rate of 50 per cent.

(Photo by Reem Mohammed/The National)

Reporter: Anna Zacharias
Section: NA
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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.”

Read more: Abu Dhabi shisha smokers defiant but cafe workers fear price hike

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.”