Tax hike is changing consumer habits in the UAE, as authorities vow to crack down on black market cigarettes
UAE's 'Sin tax' driving smokers towards cheaper brands, though many say they have at least cut down
Smokers are moving towards cheaper cigarette brands in the earliest indication of consumer trends monitored by the region’s tobacco industry since October’s 100 per cent sin tax came into force.
Whilst hiking up the price of cigarettes is seen by the World Health Organisation as one of the most effective methods of encouraging smokers to quit, one of the biggest tobacco companies claims it is failing to significantly reduce smoking in the GCC.
Premium brands such as Marlboro rose sharply from about Dh11 per packet to Dh22 overnight.
But with no minimum pricing, some cheap brands still sell for as little as Dh3 today.
Philip Morris International owns six of the world’s most popular brands, including Marlboro.
“It is still too soon to tell how many of consumers have decided to quit smoking,” said Tarkan Demirbas, area vice president for the Middle East at Philip Morris Management Services in Dubai.
“Certainly because of the tax, we have witnessed a shift in consumer behaviour towards buying cheaper brands.
“It was not surprising for us that a 100 per cent excise driven price increase has increased the market share of cheaper brands.
“This might suggest the goal of significantly reduce smoking incidence has not been achieved, since consumers are seeking cheaper alternatives, sometimes even illicit cigarettes.”
A specific tax structure, meaning a fixed monetary value applied to the same number of cigarette sticks, is proven in many countries to address both revenue and government health objectives.
The WHO says at least 70 per cent of the retail price of cigarettes should be made up of tax, to price more smokers out of the market and encourage them to quit.
According to a recent study carried out by Interpol on 84 nations, 11.6 per cent of cigarette consumption is illicit trade, equating to 657 billion cigarettes per year and costing governments roughly US$50 billion of tax revenue a year.
Ikenna Pius, 30-year-old a security guard from Nigeria working in Dubailand, said he has cut back on his cigarette smoking, rather than opt for cheaper brands.
“I’ve been smoking for seven years, mainly menthol cigarettes,” he said.
“I buy a packet of 20 and that lasts me about two days at the moment. Before the tax I was getting through two packets a day, so I’ve had to cut back and that’s mainly because of the cost.
“Dunhill is my preferred brand, and they’re cheaper back home so I stock up when I’m there and bring them back with me.
“I’ve tried to quit, and have gone six months without smoking but my father and brother smoke too so It is difficult when I’m around them. I’ve tried e-cigarettes, but they’re not the same.”
Bikas, a 25-year-old Dubai groundsman from Nepal, said price would not deter him from smoking.
“I only smoke one or two cigarettes a day anyway,” he said.
“It’s an addiction, so my friends will always find cigarettes from somewhere, and will just choose cheaper brands if the price keeps going up.”
British expatriate David, 38, who manages teams of labourers working in a production line in Dubai said his staff continue to smoke heavily during their breaks, despite the recent tobacco tax.
“Our factory guys smoke a scary amount,” he said.
“The tax hasn’t changed their consumption levels, but they do seem to be smoking the cheaper brands now with no filters.”
Smoke-free tobacco products are yet to launch in the UAE, although e-cigarettes are widely used with liquid top-ups either purchased overseas or from black market dealers.
As many alternatives to conventional cigarettes are not available to UAE consumers, it is difficult to assess their popularity, although PMI claims almost 5 million adult smokers have quit cigarettes globally by switching to electric powered tobacco heating devices that burn tobacco, without the same carcinogens.
“We are committed to transforming our company and our ambition is to one-day offer smoke-free alternatives to all current smokers, including those here in the GCC,” Mr Demirbas said.
“However, as is the nature of any consumer product launch, there are certain commercial and regulatory requirements that must be met before we can bring a new product into a market.”
PMI and Ras Al Khaimah Customs Department have signed an agreement to take a firm stance against the illicit trade of tobacco products in the UAE.
The RAK Customs Department will inspect detained products carrying the PMI trademark for authenticity and assess the impact bootleg tobacco is having on the community to contribute to a solution.
In the UAE, it is estimated that illicit trade in tobacco products accounts for US$1 million (Dh3.7m) of tax revenue a year.
“As a customs authority, we sit on the front lines of this ongoing fight,” said Dr Mohammad Al Mehrezi, director general of RAK Customs.
“Illicit trade is a crime; it gives rise to even more unscrupulous acts and is a scourge on our nation.”