Dubai alcohol tax cut saving swallowed by most venues

MMI

• Most hotels and restaurants have not passed on tax saving to consumers
• Dubai’s hospitality companies point to rising business costs
• Suspension of 30% levy has driven ‘double-digit’ rise in retail sales

Six months after Dubai suspended its 30 percent sales tax on alcohol, most hospitality venues have not passed on savings to consumers – but retailers have, driving up sales.

Mike Glen, managing director at Maritime and Mercantile International (MMI), one of the main alcohol distributors in the emirate, estimates that only around 30 percent of hotels, bars and restaurants have reduced menu prices to reflect the tax cut.

However, MMI, which sells wholesale to the hospitality sector and retail to consumers via 21 outlets, has reported “double-digit” year-on-year growth in retail sales.

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Glen said sales had been boosted by another change introduced on January 1: Dubai residents no longer have to pay to obtain a licence to drink alcohol at home.

Legal alcohol home delivery services, introduced during the pandemic in 2020, have also aided sales growth.

Dubai Duty Free, based at the emirate’s airports, said in May its retail revenues to leisure and business travellers had also surged. It is forecasting $2 billion of revenues in 2023, beating its 2019 record.

Unsplash/Crew SZ

‘The suppliers’ margins are still high’

Naim Maadad, founder of Gates Hospitality and a board member of UAE Restaurant Group, said many bars and restaurants had not passed on all the tax savings because other business costs had risen sharply.

“The cost of goods has increased drastically, which has principally put the selling price back to where it was.

“The suppliers’ margins are still high, and this should be the next step where some of that pain is shouldered by the duopoly [MMI and fellow distributor African + Eastern],” he added.

The latest S&P Global Dubai Purchasing Managers’ Index, published on Tuesday, said costs for non-oil businesses across the city were “manageable” in June, but average costs rose at the fastest rate in three months. Prices remained stable so margins continue to be squeezed.

The waiving of the alcohol tax is said to be on the basis of a year’s trial, and the business and consumer response is being monitored.

David Golding, a recovery mentor and sober coach based in the UAE, said the policy changes were likely to result in increased alcohol consumption.

He said around three-quarters of those who drink alcohol do so responsibly, but there is a growing number of individuals who struggle to manage their intake and this will have an impact on UAE society in due course.

“Alcoholism is a progressive disease and takes years to have a destructive effect on society,” he said. “But we will witness the negative impact of an abundance of cheap alcohol on society.” 

The CIA’s World Factbook compares global alcohol consumption rates based on 2019 figures.

The highest-ranked countries (the Cook Islands, Latvia and Czechia) consume around 12 litres of pure alcohol per person each year.

The UAE was 130th in the ranking, recording an average of 2.03 litres per person, followed by Bahrain and Turkey with 1.18 litres, Lebanon averaging 1.14 litres and Qatar with 0.96 litres.

“Since these 2019 figures, the UAE has implemented measures to boost its economy with alcohol sales and therefore consumption,” Golding said.

“I predict it will rise in these tables, and we will see the impact on society.”