Dubai suspended its 30% tax on alcohol sales on New Year’s Day signalling its desire to solidify its position as West Asia’s leading tourism and business destination. This is not a permanent move and the initiative will last for a year, the Financial Times reported.
Dubai, one of the world’s most important trading hubs and United Arab Emirates’ key source of revenue along with Riyadh and Sharjah. However, Dubai has faced stiff competition from Riyadh, Doha and Tel Aviv in the western Asian region across all sectors as neighbouring oil-producing countries wean themselves off their dependence on oil to strengthen their economies.
Saudi Arabia is already focusing on liberalising regulations in recent years and developing the hospitality and finance sector, competing with Dubai. Dubai also faces competition from capital Abu Dhabi within its own borders.
Expatriates and economists speaking to the Financial Times said the move extends support to tourism and hospitality sectors allowing for a strong post-pandemic recovery and urged locals to also welcome the move.
Dubai’s MMI, a firm that distributes alcohols, told the Financial Times that it will remove the fee for the personal licence required to purchase alcohol and also reflect the tax removal across its products. Staff members also told the Financial Times that they have never seen such low prices.
The Financial Times said Dubai is the region’s party capital and wealthy expatriate workers are attracted to the city because the local Muslim population remains tolerant of Dubai’s liberal lifestyle.
However, people belonging to the industry say they will wait and watch if the benefits are passed on to the consumers.
Dubai has benefited from the lifting of the Covid-19 regulations, emerged as a financial haven for Russians and the FIFA World Cup in Qatar has also helped boost the image of cities in the region.
People speaking to the Financial Times said the alcohol tax suspension could be offset by the introduction of the 9% corporate tax in June 2023. The 30% tax on alcohol was one of the ‘stealth taxes’ which generated revenue in absence of income taxes.
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