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New tobacco tax increase for the UAE
Posted on Sep 21, 2017 by Luther
In a move welcomed by health practitioners and insurance companies alike, the UAE has announced a 100% tobacco tax increase for all products from 1 October. Smoking and tobacco use has been a growing problem in the collection of Emirates, with smoking-related illnesses causing 27 deaths a day, and more and more smokers taking up the habit when they’re young.
This week, we’re going to look at what this tax will do to the price of cigarettes in the UAE, and how the tax on smoking impacts your insurance.
Tax and the impact on tobacco prices
The current announcement is not the first time tobacco products have had their prices increased in recent years. Dubai increased tax on cigarettes in August 2012, with smokers seeing their habit increase on some products from AED 8 to AED 16. The move was introduced back then to reduce the number of young people taking up smoking by making products too expensive. A 100% customs tax was also levied against imported tobacco products, however the added cost was barely noticed by consumers.
Since 2010, health officials in the UAE had been working with the Ministry of Finance to drive a tobacco tax increase at a Federal level. Now a reality, the costs of many products across the country are set to rise. According to online grocery store, Supermart.ae, the current prices for tobacco products in Dubai are:
Marlboro Red Softpack - AED 11.00
Marlboro Silver - AED 11.00
Benson & Hedges Special - AED 9.00
Lucky Strike Blue - AED 6.00
Camel Lights Blue - AED 9.50
Davidoff Classic - AED 11.00
Dunhill Blue - AED 11.00
With the new tobacco tax increase, you can expect these prices to double across the UAE after 1 October. The Ministry of Finance has stated that the tax will apply to all products consumed within the country, even in free zones and airports. However, goods accompanying travellers out of the UAE will be exempt (duty free). Their preliminary estimates are that the new tax will add AED 7 billion annually to the state budget.
The impact taxing cigarettes has on insurance
The effects of smoking on your health should be well understood by now, and we’ve even written about it quite recently. So instead of reiterating common warnings about tobacco use, we’re going to talk a bit more about how smoking and tobacco tax can impact your insurance.
Reduced tobacco users lessening burden on health system
The immediate and obvious answer to increasing the tax on tobacco is an expected drop in the number of tobacco consumers. Around the world, tobacco controls are being introduced to encourage adult smokers to quit, and prevent younger users from taking up the habit. Advertising bans have been common for decades; countries like Australia have introduced plain packaging for tobacco products, and smoke free public areas are becoming more commonplace.
According to the World Health Organization’s World Cancer Report 2014, developed countries where high tobacco controls exist have seen smoking rates begin to level off or decline; especially among men. Developing nations, however, have seen consumption continue to rise due to their low controls. Reducing the number of tobacco users reduces their reliance on a country’s health system when smoking-related illnesses begin to show.
As this begins to have a bigger impact, developing nations should see costly lung cancer and other smoking-related treatments being used less. This should free up resources and capacity in hospital and health systems to focus on other areas; smoking has been found in studies to account for approximately 8% of a country’s total healthcare costs. These savings can be used to invest in better care, or create more efficiencies in current treatments and services.
Increased state budget for reinvestment in the health system
If there’s one thing the UAE has been seen to excel at, it’s reinvesting in their health system. In fact, the country has spent the past few years improving its electronic health system, boosting preventative medicine efforts, pushing 24-hour telemedicine services, and continuing to build upon services through constant patient engagement. Continuing to push these innovations will be much easier with more room in the budget for health initiatives.
Investment in the health system can go both ways for impacting your health insurance. Either the efficiencies gained will save the hospitals money, hopefully meaning that the cost of seeking treatment will reduce. Otherwise, the cost of new technology and practices might require patients pay extra for newer services to help the hospital recoup its costs. For insurance, what an insurer may pay as a claim for your care can be reflected in your premium.
Reduced risk to insurers from lower smoking numbers
Smoking and the associated health risks are one of the more significant factors insurers consider when setting premium prices. People buying individual plans can sometimes see disclosing a smoking habit add to the cost of their plan. For group customers, insurers will generally base their pricing on a hypothetical percentage of total smokers, based on actuarial studies.
The lower the number of smokers in a country, the lower the likelihood insurers will need to cover one; meaning that insurance companies may then perceive the risk of their client being smokers to be much smaller. With an expected reduction in covering the cost of smoking-related expenses, insurers are welcoming of the new tobacco tax increase as a positive for health outcomes overall.
How can I save money ahead of the tobacco tax increase?
The easy answer is to stop smoking if you haven’t already. Beyond damaging your health, the tax increase will now double the cost of a habit that will eventually lead to an extremely expensive medical illness the longer you continue. To find out more about what you could save by quitting smoking, check out the UK National Health Services’ Calculate My Savings tool online.
The other way to save your pennies is to review your individual or corporate health insurance. When circumstances change either at your home, business, or in the insurance market itself, it might signal that a change to the way insurers calculate their fees is due. When this happens, you can take full advantage of any positive influences on health risks by checking if the plan you currently have is still the best for your situation.
If it’s not, contact the expert team at UAE Medical Insurance today. Our advisors have almost two decades of experience in delivering the best health insurance solutions for individuals, families, and businesses in the UAE. To learn more about the tobacco tax increase, your insurance options, or how you can save on your current insurance plan, talk to UAE Medical Insurance today!