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Abu Dhabi, UAEWednesday 24 October 2018

Cigarette packets to display digital labels in an effort to stamp out tax evasion 

Scheme also aims to prevent sale of so-called illicit whites, say experts 

The Government has announced a new digital stamp scheme on cigarettes from next year. Stephen Lock / The National
The Government has announced a new digital stamp scheme on cigarettes from next year. Stephen Lock / The National

Cigarette packets in the UAE will carry “digital stamps” from next year as part of a Government crackdown on tax evasion.

Officials hope the new scheme will assist authorities in preventing illegally smuggled tobacco as well as recouping millions of dirhams in lost revenue.

So-called ‘illicit whites’ – cigarettes that are imported illegally into the Emirates – currently account for around 30 per cent of sales in the country.

Demand for the cheap imports is also thought to be strengthening following a Government decision last year to double the price of tobacco products.

On Sunday, a spokesman for the UAE’s Federal Tax Authority (FTA) said the digital stamps would allow officials to “efficiently collect taxes, ensure transparency and combat tax evasion”.

It also warned cigarette manufacturers to abide by the scheme, claiming anyone caught operating illegally would be prevented from “exercising any commercial activity until they comply fully”.

The new digital stamp initiative is set to be introduced across the UAE by the beginning of next year.

It comes as authorities continue their battle with illegal importers - often from Iraq, Syria and Iran - who ignore paying excise duty.

Under the scheme, all cigarette packets sold in the Emirates must display the correct stamp, which contains importer and manufacturer details.

Special scanners will allow customs officials and others to check individual products, ensuring the goods can be properly traced and accounted for.

“If someone is selling a pack of cigarettes that used to be sold for Dh11 and is now being sold for Dh22, and the excise duty hasn’t been paid, their profit is going to be huge,” said Lisa Martin, founder of UAE VAT consultancy firm, The Counting House.

“It’s much less easy to track excise duty than it is to track VAT, because VAT is charged and paid over by the retailer.”

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Read more:

Illegal 'white' cigarettes make up a third of UAE's sales: report

UAE’s cigarette tax ‘could lead to surge in tobacco smuggling’

Palestinian tobacco is the West Bank’s ‘new cash crop’

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The digital stamp scheme will initially apply to cigarette packaging only, but will eventually be expanded to include all tobacco products sold in the UAE.

Anyone found to be in possession of products that do not carry the stamps, or who allows the use of their facilities to sell them, will be subject to a penalty.

Fines, which have yet to be announced, will also be issued against anyone found to have tampered with the stamps or who print labels over the top of them.

In 2016, Dubai Police seized 7.6 million tobacco products as part of a broader haul of counterfeit goods worth Dh1.6 billion, although the exact value of smuggled tobacco was not given.

FTA Director General Khalid Ali Al Bustani, said: “The UAE is the first country in the region to implement a Digital Tax Stamp Scheme for tobacco products.

“The system offers an innovative solution for combating tax evasion and facilitating inspection and control at customs and markets.

“Digital tax stamps are placed on the packaging of tobacco products and registered in the FTA’s database. They contain tax-related data that can be read using special devices.”