Dubai Duty Free will be subject to the UAE’s new ‘sin tax’ on relevant goods sold to arriving passengers at Dubai International Airport, according to the company’s executive vice-chairman Colm McLoughlin.

However, goods sold to departing passengers will be exempt, McLoughlin said.

The UAE federal government last month published regulations to implement a dedicated tax on “harmful products” such as tobacco and fizzy drinks by October.

Under the rules, excise duty will be applied at a rate of 100 percent on tobacco and energy drinks, and 50 percent on fizzy drinks.

McLoughlin, who helped found Dubai Duty Free in 1983, told Arabian Business that excise duty, and the accompany value-added tax (VAT) to be introduced in January, would be “good for Dubai” as they would provide new sources of funding for government projects.

He explained how the rules would affect Dubai Duty Free, saying the company would be “totally exempt on departing passengers” but that for arriving passengers “there will be change”.

“We don’t really mind,” he said. “Again, it’s funding for the government, but secondly, if cigarette prices double both in our arrivals duty free and downtown, we will still be good value in comparison to downtown.”

McLoughlin added that Dubai Duty Free would be wholly exempt from the incoming VAT, providing the company with a competitive advantage.

“We see a very positive thing in it because Dubai Duty Free will be exempt from VAT, which means the value perceived by the customers will be better. So we’re not scared of VAT at all,” he said.

“We don’t envisage it will have an impact on stock that we’re buying, but we will of course be paying VAT on public shops we have at the airport, and there are still discussions going on about VAT and its implementation.”

He added: “You know, many different parts of the world work very comfortably with VAT and I don’t see why [the UAE] can’t.”

The GCC is developing taxes to compensate for falling oil revenues. The introduction of excise tax and VAT are expected to boost inflation by a one-off 1.4 percent, the government has said.

Read the full interview with Colm McLoughlin in Arabian Business on Sunday.