The Fiscal Impact of Wholesale cigarette Businesses
Cigarette wholesalers in Dubai are those who work directly with the cigarette manufacturers and do not need to be licensed by the government. The government has mandated that all cigarette wholesalers comply with these firms’ quality standards, and policies, as well as their labeling requirements. Unless otherwise stated, wholesalers who import cigarettes from these firms must comply with the federal government’s mandatory policies.
- Cigarette wholesalers can sell bulk quantities without the need for individual sales permits. For larger quantities, they can apply for an exception from the cigarette tax rate. The exceptions are granted on a case-by-case basis and are subject to renewal based on volume. Bulk purchases from cigarette wholesalers can help reduce distribution costs and allow the manufacturers to improve their profit margins.
- Wholesalers must obtain an import permit, which is granted based on the number of imported cigarettes sold in a calendar quarter. Some of the reasons for obtaining an import permit are to avoid excessive duties on the cigarette imported, to take advantage of lower cigarette duty rates, to keep products out of prohibited areas, and to avoid excessive taxation on imported cigarettes. Cigarette wholesalers are only allowed to import cigarettes if they are accompanied by a valid customs declaration.
- A licensed cigarette wholesaler is not required to have his or her products inspected during importation, processing, or retail sale. Each transaction between a wholesaler and a retailer is conducted without any sort of third-party intervention. For instance, wholesalers don’t need to sell cigarettes with brand names that customers have already heard of. On the contrary, the company selling cigarettes may have recently introduced a new cigarette brand. Such cases are considered exceptional and will not require a license. If a manufacturer has introduced a new cigarette after five years, then it is likely that the manufacturer will be granted a license.
- The financial impact of cigarette wholesaling on the country’s revenue is quite sizable, especially during times of increases in tobacco demand and lower tax rates. According to estimates, cigarette wholesalers account for around 20% of gross domestic product (GDP). An increase in cigarette demand results in higher production prices leading to higher retail prices as well. Imports lead to higher imports, as well, though the fiscal impact is mitigated through the lower duty payable on imported goods.
The most important fiscal impact of cigarette wholesalers or tobacco companies In UAE operating is the difference in fiscal profit and loss experienced by the companies. Wholesale companies generally earn higher profit margins, since they do not operate in the same capacity as retail giants. However, wholesalers usually do not have the same level of overhead expenses faced by retail giants. They do not need to maintain a fleet of sales vehicles buy inventory, pay employees to rent space.