Dubai kicked off the new year by scrapping a 30% tax on alcohol sales and making liquor licences free in an apparent move to bolster its status as the Middle East’s leading business and tourism hub.
Faced with increasing competition from Persian Gulf neighbours such as Saudi Arabia and Qatar, the government has introduced a series of rules over the past few years to make itself more attractive for foreigners to live and work in.
Tourism is a key plank of the emirate’s economy, but it has been geared predominantly towards the luxury segment. The latest move will leave Dubai better positioned to cater to wider swathes of the market.
The move is “extremely positive” for restaurants and hotels, said Tim Cordon, Radisson Hotel Group’s COO for the Middle East and Africa.
Liquor is widely available in Dubai, but a pint of beer can cost more than $15 (about R256) at restaurants and bottles of wine can start at more than $100. That has prompted many residents to drive to other emirates like Umm Al Quwain, about 80km from Dubai, where prices are much cheaper.
One of Dubai’s two alcohol distributors, Maritime and Mercantile International, announced the move with advertisements proclaiming an end to these long drives. Dubai’s other state-linked distributor, African & Eastern, has already cut prices to reflect the removal of the sales tax, it said on Instagram.
Both companies said liquor licences, which cost about $70 a year, will now be free. They will still be needed because the United Arab Emirates restricts sales of alcohol to Muslims.
Dubai’s initiative will be trialled for a year and the government is likely to monitor how effectively the lower prices are passed on to consumers. A 5% VAT will continue to be levied on alcohol sales.
Bloomberg
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