VAT Investigation: Markets are monitored after 4 months

Gulf markets are monitored after 4 months on the imposition
Gulf markets are monitored after 4 months on the imposition

Officials confirmed that the commodities and products for which the selective commodity tax was imposed – tobacco products, soft drinks and energy drinks – had been affected by the introduction of the tax on October 1, 2017, ranging from 50% for soft drinks and 100% for tobacco products and beverages Energy, pointing out that in addition to the selective goods tax, these goods also included an additional VAT tax of 5%, which increased the tax effect in these products.

In several rounds, the Gulf has monitored the availability of new products on the market, such as tobacco products and energy drinks that were not available before taxes were applied. This confirms consumers’ tendency to lower-priced products specifically for tobacco products and energy drinks that exceed 100% “Selective Goods” and “Additive” taxes.

UAE to impose 100% excise tax on tobacco and energy drinks, and 50% on soft drinks. Source Arabian Business
UAE to impose 100% excise tax on tobacco. (Source: Arabian Business)

Many consumers have turned to lower-priced, lower-quality products to try to offset high taxes, particularly on tobacco products and energy drinks, while many companies are looking for mechanisms to limit such impact, In the same quality, but at lower volumes, such as soft drinks, which seeks to Dubai Refreshments to study the issuance of new packaging in lower volumes in the near future, because of the difficulty of providing new types of soft drinks, because of the dominance of the known species.

The lowest products
“The internal estimates of Philip Morris Middle East, following a market follow-up after selective taxation in October 2017, have shown a strong trend towards lower product acquisition in the market,” said Gamal El-Din, director of institutional affairs at Philip Morris Middle East. We are committed to meeting the demands of adult smokers.

As our products are sold in more than 180 countries in all price categories, we are not surprised by the 100% price increase due to the selective tax that has been made. Applied in Skills in increasing the market share of low-price products, as many adult smokers are looking for low price options because of the impact of the high cost and increase the selective tax. »

Tax returns
“From a financial point of view, this trend towards lower-priced products will ultimately affect the government’s potential tax revenues. The selective tax is now being levied by doubling retail prices, Through the application of fixed financial value on the same number of cigarettes, which proved to be effective in various countries of the world, this will contribute to the tax to achieve the goals of the government health and financial.

She pointed out that with the application of the structure and the current level of selective taxation, we believe that the trend towards lower products will continue, for example, the retail prices of the cigarette pack range from AED 4 to more than AED 20 per pack containing 20 cigarettes, and we are determined to continue monitoring Market trends; to ensure that customer needs and expectations are met

Illegal trade
“We have a firm belief that the threat posed by illicit trade will have harmful effects,” she said. Not only on the legal tobacco industry, but also on the health and revenue targets of the government. In this context, we are fully convinced that government revenues and legal actions need protection, for the benefit and security of society at large. “
Demand declined
A number of supermarkets and supermarkets confirmed that demand for certain varieties of cigarettes had declined following the introduction of a selective tax, whereby the price of tobacco was raised by 100%.

On a tour of the Gulf on some outlets and grocery stores, it was noted that the shelves were empty of specific items. Their price was met by the existence of new items that were not known in the past, including local and imported ones. Some grocery sellers also hid cigarettes in vegetable boxes, Licensed to sell, while others complained of the absence of the traditional customer of cigarettes, which is asked for a single package instead of the Fund as was the case before.

Omar Khan said that during the past few years there has been a lack of demand for known brands of cigarettes, especially as prices have doubled. This has led most smokers to experiment with new varieties, which have made their way to the shelves.

He added that the shops did not spare any effort to provide alternatives to cigarettes, so as not to lose shoppers, as the majority of them refrain from smoking the items they have been accustomed to for years, where some tried to try some items of limited price, and then buy them permanently, Increased demand from suppliers, who did not meet this, and therefore we have to reduce the space of shelves for the supply of cigarettes to limited quantities available.

Soft drinks
Tariq Al Sakka, General Manager of Dubai Refreshments, said that the well-known soft drinks still dominate the market, despite selective commodity taxes and VAT, which have led to an increase in the price of some of these products by up to 60% in some cases. He said. However, these products still exist mainly in the market, and it is difficult to provide alternative types in a short period because of the popularity it enjoys
Fizzy drinks will be targeted under the tax. Source: The National
Fizzy drinks will be targeted under the tax. (Source: The National)
Launch new sizes
said in remarks to the Gulf that the short period of time since the introduction of the selective tax has not yet allowed the emergence of new products at lower prices to compensate for the rise in prices in the basic products available today, expecting that new products will appear in the coming periods.

The sector is currently working to study the launch of packages of new sizes, not entirely new products, to compensate for the price difference due to taxes. He pointed out that the sector was clearly affected by the implementation of the tax, and the volume of sales witnessed a significant decline.

Old stock
Mohammed Javed, a grocery store salesman, said global demand for cigarettes was on the decline, especially as most of his customers were smokers asking for cheaper items to smoke.

He pointed out that the well-known cigarette boxes sold only a small amount of demand, which made them accumulate. He pointed out that he resorted to the ploy to sell cigarettes at a lower price than the market, in order to get rid of the old stock has, but that did not attract many customers, especially as some of them trying to exploit these price increases in the prices of cigarettes to quit smoking, as the increase in the impact of their financial income .

Traditional customer
Kumar Ghulam, a grocery salesman, said there was a sharp drop of 70% in the sales of many varieties of cigarettes. He said that 100 days after the introduction of the selective tax, he currently sells one cigarette box per week, unlike the pre-selectivity period, Which was selling 3 boxes a day. He said that the disappearance of the traditional customer who came daily to get the usual cigarettes has become a scourge to the grocery store in general, as it began to lose its permanent customers in return for their demand for new varieties that are cheaper. Most of them buy one package, not a box.

Keeping up with the supplier
Mohieddin Shams
, a salesman at one of the major outlets, explained that the high demand for new items made it difficult to keep up with the quantities supplied by the suppliers to each outlet, so that on some days the sales shelves were free of these items, especially since the majority of consumers tended to smoke. Some of them buy more than one box at a time, fearing that they will be out of the market.