Health or Law: Raising cigarette prices a conundrum for GCC?
Illegal cigarettes sales might be fueled by a planned doubling of cigarette prices in the GCC. (Photo for illustrative purposes only).
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The dilemma facing GCC finance ministers as they deliberate over a 100 per cent increase in duty on tobacco products is underlined by a White Paper published today which spotlights the growth in illicit trade, beyond the control of police and customs authorities, as an inevitable consequence of a sharp overnight rise in the cost of cigarettes.
Based on a round table discussion examining the impact of a new tobacco tax on smoking, and the effects on trade and social stability, the White Paper finds no evidence that a one-step, 100 per cent overnight increase in duty on tobacco products will significantly affect consumption levels or smoking propensity. It highlights concern that a sharp increase in cigarette prices will fuel the growth of illicit tobacco trade into the GCC countries, undermining tobacco control and leading to young people being targeted by gangs involved in smuggling.
It also points to a need for the GCC authorities to take a lead role in driving education and awareness programmes to warn people especially the young against the risks of smoking, removing the cool factor from smoking, and reinforcing tobacco control by putting in place more barriers to smoking in public places to affect the habits of smokers.
The round table discussion, which took place in Dubai on 14th April, brought together Major Dr. Khalid Al Hassan, Head of the Anti-Forgery section of the Economic Crime Department, Dubai Police, Jonathan Davidson, Chairman of the British Business Group Dubai and the Northern Emirates, and Managing Partner of Davidson & Co. Legal Consultants, Omar Obeidat, Partner and Head of Intellectual Property at Dubai law firm, Al Tamimi & Co., and Dr. Bruce Budd, Associate Professor, College of Business, Al Faisal University, Riyadh, Saudi Arabia.
Major Dr. Al Hassan believes the impact in the GCC would be far lower than four per cent. He said the UAE is "a country where the majority of the population has a high income, so they don t care about a price increase. The price of cigarettes is not expensive when compared to other areas of the world. A price increase may affect some nationalities with a low income, but for UAE locals and expatriates, they don t care. I don t think tax would be the solution to problem."
Illicit trade creates uncontrolled and unaccountable markets, resulting in children being able to obtain tobacco more easily, and the livelihoods of tobacco retailers being threatened. The discussion suggested that efforts to counter illicit trade in tobacco products could be helped by the kind of publicity which had deterred people in the UAE from other risks, for example, the dangers in issuing cheques that bounce because of the legal consequences.