The UAE has taken a proactive approach to public health, introducing excise tax as a tool to reduce the consumption of unhealthy products. The government aims to combat lifestyle diseases, encourage healthier choices, and ease the burden on the healthcare system by making harmful goods more expensive.
Excise tax in the UAE applies to tobacco, vaping products, energy drinks, carbonated beverages, and sweetened drinks. These products have been linked to serious health risks such as obesity, diabetes, heart disease, and respiratory problems. By increasing the cost of these items, the UAE government is discouraging excessive consumption and promoting healthier alternatives.
Beyond taxation, the UAE has implemented a range of policies and awareness campaigns to educate the public, regulate marketing practices, and encourage businesses to offer better choices. These measures ensure that consumers are informed about the risks of unhealthy products while giving them more incentives to adopt a healthier lifestyle.
Why the UAE Introduced Excise Tax on Unhealthy Products
The rising number of lifestyle-related diseases is a growing concern worldwide, and the UAE is no exception. Unhealthy diets, tobacco use, and excessive consumption of sugary beverages have led to higher rates of obesity, diabetes, and cardiovascular diseases. These health issues not only affect individuals but also place a financial strain on the country’s healthcare system.
The introduction of excise tax was a strategic decision to address these problems at the source. By increasing the price of harmful products, the government is making consumers think twice before making a purchase. When a product costs significantly more, people are more likely to cut back, switch to healthier options, or stop using it altogether.
This tax is also designed to support the healthcare sector by generating revenue that can be invested in public health programs, awareness campaigns, and medical services. The funds collected from excise tax help the government develop preventative healthcare initiatives that benefit the entire population.
How Excise Tax Has Changed Consumer Behavior
The introduction of excise tax in the UAE has fundamentally altered the way consumers interact with taxable products. With prices rising by 50% to 100% on tobacco, vaping products, energy drinks, carbonated drinks, and sweetened beverages, many people have reconsidered their consumption habits. The tax has forced consumers to make more informed purchasing decisions, leading to a noticeable shift in market demand.
Businesses that rely on excise goods must understand these behavioral shifts to remain competitive. Whether through product reformulation, pricing strategies, or targeted marketing, companies need to adapt to ensure that they continue meeting consumer expectations in a changing market.
1. Consumers Are Actively Seeking Cheaper Alternatives
Before the excise tax was implemented, price was less of a deciding factor for consumers purchasing carbonated drinks, energy drinks, and tobacco products. However, with the substantial price increases, many consumers are now actively searching for lower-cost alternatives.
For beverage consumers, this means choosing local or lesser-known brands that offer lower-taxed or sugar-free options at a more affordable price. Some buyers have also started purchasing multi-pack offers or bulk deals to offset the higher per-unit cost.
For tobacco users, the shift has been even more pronounced. Many traditional cigarette smokers have switched to lower-cost tobacco brands or nicotine alternatives such as patches and gum. Some have even turned to herbal cigarettes and nicotine-free vaping liquids to avoid the 100% excise tax on standard tobacco products.
To remain competitive, businesses need to adjust their pricing models, introduce bundle offers, and stock a mix of premium and budget-friendly alternatives.
2. More Consumers Are Choosing Sugar-Free and Healthier Options
The excise tax on sugary beverages and carbonated drinks has prompted a dramatic increase in demand for sugar-free, diet, and natural beverage options. Consumers are more health-conscious than ever, and many now opt for:
- Diet sodas and zero-sugar soft drinks instead of regular carbonated beverages.
- Fresh juices and infused water as replacements for sweetened drinks.
- Organic and herbal energy drinks as a substitute for traditional high-sugar varieties.
As a result, beverage manufacturers have reformulated many of their products to include lower sugar content or natural sweeteners. Businesses that do not adapt to this trend risk losing market share as more consumers shift toward healthier, tax-efficient choices.
Retailers should focus on stocking a wider variety of diet and sugar-free products, while brands should highlight health benefits and natural ingredients in their marketing efforts.
3. Tobacco Consumption Has Declined as Smokers Consider Quitting
Excise tax has made smoking significantly more expensive in the UAE. A pack of cigarettes that previously cost AED 10 now costs AED 20 or more, leading many smokers to reconsider their habits.
Some consumers have reduced their cigarette intake rather than quitting completely, while others have begun exploring smoking alternatives such as nicotine patches, herbal cigarettes, and vaping. The demand for smoking cessation programs and medical support has also increased as more people attempt to quit smoking due to financial and health concerns.
For businesses in the tobacco industry, this shift means they need to diversify their product offerings to cater to smokers who are cutting back or switching to alternatives. Tobacco brands that fail to provide nicotine-free or reduced-risk options may see their market shrink over time.
4. Young Consumers Are Reducing Their Consumption of Excise Goods
Younger generations are more price-sensitive and health-conscious than older consumers. The rising cost of energy drinks, vaping products, and carbonated beverages has led many young buyers to completely rethink their consumption habits.
For example, many young adults who previously consumed energy drinks daily have cut back or replaced them with black coffee, green tea, or natural supplements. Similarly, vaping—once a rapidly growing trend among young consumers—has seen a slowdown in adoption due to rising costs and increasing awareness of health risks.
For businesses targeting younger demographics, marketing strategies must evolve. Brands should focus on value-driven promotions, loyalty programs, and health-conscious messaging to appeal to a generation that prioritizes both affordability and well-being.
5. Consumer Spending on Excise Goods Has Become More Intentional
Before the excise tax, purchasing excise goods was often an impulse decision. A customer might grab a soft drink at checkout or pick up a pack of cigarettes without thinking twice. However, the significant price increases have changed this behavior.
Consumers are now making more intentional purchasing decisions, which means businesses can no longer rely on impulse-driven sales. Instead, companies must:
- Offer exclusive promotions or bulk discounts to encourage larger purchases.
- Highlight product value and quality to justify higher costs.
- Provide personalized incentives such as rewards programs for repeat buyers.
Retailers should rearrange store layouts to focus on planned purchases rather than impulse buying, ensuring that excise products are marketed strategically to retain customer interest despite higher prices.
6. Online Sales of Excise Goods Have Increased
With rising in-store prices, many consumers have turned to e-commerce and online platforms to find better deals on excise goods. Online retailers often offer bulk discounts, exclusive promotions, and subscription-based pricing that make purchasing excise goods more affordable.
Businesses in the excise goods industry must expand their online presence to remain competitive. Companies that fail to offer convenient online ordering, delivery options, and digital discounts may lose customers to competitors with stronger e-commerce strategies.
Investing in a well-optimized online store, mobile apps, and digital marketing campaigns can help businesses retain price-sensitive customers while improving overall sales.
7. Demand for Transparency and Health Information Has Increased
Consumers today are more informed than ever. The excise tax has not only raised prices but also sparked conversations about health risks, leading to greater demand for product transparency and clear ingredient labeling.
Many consumers now actively read nutritional labels and research the health effects of excise products before making a purchase. Businesses that provide detailed product information, transparent ingredient lists, and health-conscious branding will have a stronger appeal to this new wave of educated consumers.
To build trust, businesses should:
- Ensure clear, honest packaging that highlights nutritional facts.
- Educate consumers on product benefits through marketing campaigns.
- Provide healthier options while communicating their advantages effectively.
Companies that embrace transparency and consumer education will stand out in a competitive market, as health-conscious customers become a dominant force in shaping demand.
Excise Tax as Part of a Larger Health Policy
Excise tax is not an isolated policy—it is part of a comprehensive strategy to improve public health in the UAE. Along with taxation, the government has introduced strict regulations on marketing, clearer labeling requirements, and educational initiatives to further discourage unhealthy consumption.
Clearer Food and Beverage Labeling
To help consumers make informed choices, the UAE has implemented stricter labeling laws for food and beverages. Products high in sugar, salt, or unhealthy fats must clearly display their nutritional content, allowing consumers to see how much sugar or calories they are consuming in each serving.
Additionally, many products now feature warning labels or color-coded indicators that highlight high-risk ingredients. This makes it easier for people to identify which products to avoid or consume in moderation.
Stricter Advertising and Marketing Rules
The government has placed tight restrictions on the marketing of excise goods, especially for products that appeal to children and teenagers. Companies are prohibited from advertising unhealthy products in schools, and misleading health claims on packaging are being closely monitored.
Fast-food chains and beverage companies have also been encouraged to adjust their marketing strategies to promote healthier menu options and low-sugar alternatives. Many brands have responded by introducing sugar-free drinks, plant-based meals, and portion-controlled options.
School Health Programs and Public Awareness Campaigns
The UAE has introduced health education initiatives in schools to teach children the dangers of excessive sugar and tobacco use. Students are encouraged to adopt healthier eating habits from an early age, reducing their likelihood of developing lifestyle diseases later in life.
In addition, the government runs nationwide awareness campaigns on the risks of excessive sugar consumption, smoking, and energy drink abuse. These initiatives help reinforce the impact of excise tax by ensuring that consumers understand why these products are being taxed.
How Businesses Are Adapting to Excise Tax Regulations
The excise tax has also forced businesses to rethink their strategies. Companies that manufacture, distribute, or sell excise goods have had to adapt to changing consumer demand while remaining compliant with tax regulations.
Reformulating Products to Reduce Tax Liability
Many beverage companies have adjusted their recipes to include less sugar, making their products exempt from excise tax or taxed at a lower rate. This has led to a rise in sugar-free and diet beverages, which now occupy a significant share of supermarket shelves.
Expanding Product Lines to Include Healthier Options
Retailers and food service businesses have responded to consumer preferences by offering a wider range of health-conscious products. Many restaurants and cafés now feature:
- Organic and plant-based meal options.
- Fresh juice and herbal tea alternatives to sugary drinks.
- Low-calorie or reduced-fat snacks instead of high-sugar desserts.
Businesses that fail to adjust their offerings may risk losing customers who are actively seeking healthier alternatives.
Strengthening Compliance with Excise Tax Regulations
For companies that continue to sell excise goods, ensuring full compliance with tax regulations is critical. Businesses must:
- Register for excise tax with the FTA before selling taxable goods.
- Ensure accurate tax filings and payments to avoid penalties.
- Maintain proper records of excise tax transactions for at least five years.
Companies that fail to comply with excise tax laws face heavy fines, shipment delays, and potential trading restrictions.
The Future of Excise Tax and Public Health in the UAE
The UAE government is expected to expand its health-driven taxation policies in the coming years. Additional products that contribute to lifestyle diseases, obesity, and addiction may be added to the excise tax list, including:
- Highly processed junk food with high sodium and trans fats.
- Certain categories of confectionery and ultra-sugary snacks.
- More restrictions on artificial sweeteners and chemical additives.
Future policies will likely continue encouraging companies to create healthier products while reinforcing public awareness on the dangers of poor dietary choices and tobacco consumption.
Final Thoughts: Excise Tax Is Shaping a Healthier UAE
Excise tax is not just about raising government revenue—it is a powerful tool for shaping healthier consumer habits and reducing lifestyle diseases. By making unhealthy products more expensive, the UAE government has encouraged better dietary choices, reduced tobacco use, and increased awareness of public health risks.
For businesses, compliance with excise tax regulations is not optional. Companies must adapt to evolving policies, adjust their product offerings, and implement strong tax compliance measures to remain competitive in the changing market.
For expert guidance on excise tax compliance, reporting, and business adaptation strategies, Protax Advisors provides professional tax solutions.
Book a free consultation today and let Protax Advisors help you navigate excise tax laws while optimizing your business strategy for a healthier future.
