Dubai Suspends Alcohol Tax as Regional Competition Heats Up

Dubai started the new year by suspending its 30 percent tax on alcohol, a move that could help the Gulf emirate attract more tourists and businesses amid growing regional competition.

Dubai removed the tax on Sunday, along with the fee for a license that individuals need to buy alcohol, local beverage distributors said.

The emirate’s government did not immediately confirm the policy changes, and the Dubai Media Office did not respond to a request for comment.

Offering significantly cheaper liquor is likely to bolster Dubai’s position as the Middle East’s center for tourism and business at a time when economists are warning of a global economic slowdown that could dent spending on travel and leisure.

More than 90 percent of Dubai’s population are foreign residents, and alcohol has been widely available in the emirate for years, unlike nearby Saudi Arabia and Kuwait — where it remains banned — and Qatar, where its purchase is more restricted. But the hefty municipality tax drove up alcohol prices in the city-state, where residents complain about the rising cost of living and tourism is often oriented toward luxury.

The changes are likely to give a boost to the local hospitality industry, Maritime and Mercantile International, one of the country’s main distributors, said on LinkedIn on Monday.

“The prices are here to stay and are on a long-term trial,” another liquor distributor, African + Eastern, said in a statement. The Financial Times reported that the tax suspension would last for a test period of one year, citing industry executives.

“Huge credit to Dubai Government for taking such a bold decision,” Jason Dixon, chief executive of African + Eastern, said on Monday, adding that the company would pass on the full savings to consumers. “This announcement will be especially transformative for tourists and residents.”

The decision was the latest in a series of measures that appear to be designed to cement Dubai’s position as the dominant hub for tourism and investment in the Middle East.

While it is still the most popular regional destination for tourists and foreign workers, Dubai is facing increasing competition from Qatar and Saudi Arabia, where Crown Prince Mohammed bin Salman has been overhauling the kingdom’s oil-dependent economy and rapidly loosening social restrictions in an effort to make Riyadh, the capital, a global destination.

The Saudi government has reined in the religious police, eased a conservative dress code, sponsored concerts and raves, and offered its first tourist visas in 2019. Officials have also been deploying a mixture of incentives and ultimatums to persuade multinational companies to locate their regional headquarters in Riyadh instead of Dubai.

Last year, Prince Mohammed said he wanted to eventually increase the proportion of foreign residents to 70 percent of the kingdom’s population, from around one third now. That would require making Saudi Arabia a more appealing place for foreigners to live. While alcohol is still illegal, rumors have been spreading for years that the policy could change, perhaps in restricted zones or hotels — as it once was in Dubai.

A semi-independent city-state in the Muslim-majority United Arab Emirates, Dubai has been loosening its alcohol regulations for years. Nominally, the government requires individuals who want to buy alcohol to obtain a license, which are only available for non-Muslims over the age of 21. But in practice, bars, clubs and restaurants almost never ask to see a permit.

Over the past few years, the United Arab Emirates has also eased immigration rules, decriminalized cohabitation for unmarried couples, and changed to a global business-oriented working week of Monday through Friday, diverging from its neighbors, which maintain a weekend of Friday and Saturday to accommodate Islam’s communal Friday prayers.

Those policy changes were intended to make the country a more attractive place for foreigners to work and live. As in neighboring Qatar, the entire economy hinges on foreigners, from the low-wage workers who build skyscrapers and pump gasoline to highly-paid executives and Instagram influencers.

While some Emiratis are uncomfortable with the pace and direction of their country’s transformation, vocal dissent has been largely repressed.

The availability of alcohol became a flash point in Qatar last year as the country hosted the men’s soccer World Cup, reversing direction at the last minute to ban beer sales at the stadiums. Liquor is available in hotels and many restaurants in Qatar, but far less so than in Dubai.

It was not immediately clear how Dubai’s removal of the alcohol tax would affect the government’s finances. The emirate does not collect personal income tax, but unlike neighboring Abu Dhabi, has no significant oil resources, and relies on revenue from other taxes and fees, including the levy on alcohol. The United Arab Emirates plans to introduce a 9 percent corporate income tax later this year.

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