Dubai scraps hefty alcohol tax to boost business and tourism

A monorail passing over the skyline of Dubai, United Arab Emirates, 2019. Jon Gambrell/Associated Press, File

Dubai kicked off the new year by removing the 30% tax on alcohol sales and making liquor licensing free in a clear move to strengthen its position as a major business and tourism hub in the Middle East. .

Faced with increasing competition from Persian Gulf countries such as Saudi Arabia and Qatar, the government has introduced a series of rules over the past few years to make it easier for foreigners to live and work.

Tourism is an important component of the emirate’s economy, but it is primarily aimed at luxury goods. The latest move has allowed Dubai to serve a wider range of markets.

Tim Cordon, chief operating officer for the Middle East and Africa at Radisson Hotel Group, said the move was “very positive” for restaurants and hotels.

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$15 pint

Liquor is widely available in Dubai, but pints of beer can cost upwards of $15 and bottles of wine can run upwards of $100 in restaurants. As a result, many residents now drive to other emirates where prices are much lower, such as Umm Al Quwain, about 50 miles from Dubai.

Maritime and Mercantile International, one of Dubai’s two alcohol distributors, announced the move with an ad declaring the end of those long drives. Dubai’s state-owned distributor African & Eastern said in an Instagram post that it had already cut prices to reflect the removal of the sales tax.

The companies said the liquor license, which costs about $70 a year, will be free. They will continue to be required as the United Arab Emirates restricts the sale of alcohol to Muslims.

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uniform scaffold

The emirate’s burgeoning culinary scene recently received a boost from Michelin, with 11 restaurants awarded at least one star. Still, the city is sometimes at a cost disadvantage compared to other hubs, and hoteliers are lobbying for lower taxes.

“Where the prices differ is when you look at the wine list,” Cordon said.

Dubai’s latest initiative will last a one-year trial period, with the government likely to monitor how effectively lower prices are communicated to consumers. Sales of alcohol will continue to be subject to a 5% VAT.

Taxes from alcohol sales have been an important source of revenue for the Dubai government, but the impact of reducing them could be offset by a federal corporate tax of 9% starting in June.

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more expats

The city’s rapid economic recovery from the pandemic has also boosted key sectors such as tourism and real estate, which could help absorb some of the alcohol revenue shortfall.

Over 80% of the UAE’s 10 million population are expatriates, of which Dubai is the largest. The country’s government plans to attract millions more in the coming decades, and authorities have introduced a number of measures aimed at easing social restrictions.

The United Arab Emirates lifted its ban on unmarried couples living together last year and moved to a Monday-Friday working week. It also eased immigration rules, including introducing a “golden visa” that allows foreigners to work, live and study in the country without needing a sponsor.

Alcohol is still completely banned in Saudi Arabia. Other regional countries, including Qatar and Oman, have heavy taxes.