Jordan Duty Free

Smoking gun

Returning back from your holiday trip, you will notice one thing has changed at the airport: while waiting for your luggage, the standard practice for every Jordanian is to go buy cigarettes at the duty free counter. To everyone’s surprise, cigarettes are no longer sold upon arrival. Only at the departure wing of Queen Alia Airport can you find cigarettes.

What is going on?


Disappear in a puff of smoke

The Airpot Duty Free is run and managed by a company called Aldeasa which is owned by Swiss publicly traded travel retailer Dufry (ticker: DUFN).

A casualty among other travel-related stocks, its share price tanked 70% during the height of the pandemic and is gradually recovering with the global easing of travel restrictions.

During the first six months of 2021, sales have not recovered to pre-COVID levels.

Source: H1 FY21 Dufry

Yet their tobacco sales, as a percentage of total sales, remained stable at around 10%.

Unfortunately we cannot get data for specific sales numbers for QAIA.

When it comes to land borders, Jordan Duty Free Shops (ticker: JDFS) is king; and King Hussein Bridge accounts for the largest portion of its sales.

Comparing Q2 2021 to the previous year, we can see that sales have nearly quintupled, going from 1.3 to 6.5 million JOD. Yet when comparing first halves, H1 2020 sales were at 25 million JODs compared to 9.2 million for H1 2021.

Unfortunately, for JDFS, we cannot account for tobacco sales.


Where there is smoke…

According to the latest report by the Tax Department, taxes collected from cigarettes rose by 52% for the period of January-November 2020. This jump can easily be explained by the fact that people, such as myself, could not get the luxury of smoking Duty Free cigarettes once airports and land borders shut down. Smokers had to rely on local brands.

Source: Income and Sales Tax Department

Cigarettes are no longer found at duty free retailers when entering Jordan and the government jumped at the opportunity. All in all, by November of 2020, cigarette tax accounted for 12% of total budget revenue.1

This seems to be a decision taken by the tax department or ministry of finance to increase local revenue.

However this could encourage smuggling of (counterfeit) cigarettes now that borders have reopened. It would be interesting to compare Cigarette Tax income for 2021 compared to lockdown year 2020 and I will publish an update note once the numbers are released.


Conclusion

Jordanians are addicted to cigarettes and the government is addicted to smokers2. As long as smokers keep puffing away their lungs to cancer, at least the government is benefitting in paying its dues.

I for one, after 19 years of a smoking addiction (although I do miss it at times), finally managed to quit… I do hope the government does the same.

1

http://www.gbd.gov.jo/Uploads/Files/gbd/law-min/2020/en/1.pdf