Dubai suspends alcohol tax as regional competition heats up

More than 90% 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 Monday, adding that the company would pass on the full savings to consumers. “This announcement will be especially transformative for tourists and residents.”

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% corporate income tax later this year.