Saudi Arabia introduces 'sin tax' from today

UAE to introduce tax on tobacco products, energy and soft drinks from Q4 2017
By Parag Deulgaonkar
Sun 11 Jun 2017 09:34 AM

Saudi Arabia has implemented 100 percent excise tax on tobacco products and energy drinks, and 50 percent tax on soft drinks from today (Sunday).

Last month, the kingdom announced imposing excise tax from June 11, after the Gulf Cooperation Council unified value-added tax (VAT) and excise tax treaties were ratified in May 2017.

The UAE is set to introduce the excise tax from the fourth quarter.

Price of a 250ml can of “Code Red” energy drink increased to SR4 from SR2, while Red Bull is being priced between SR10 and SR12, Saudi Gazette quoted industry sources, as saying.

Without naming any soft drink manufacturer, the daily said a global soft drink maker reduced its can size to 330ml from 355ml as it introduced a 50 percent price hike.

Officials of Saudi General Authority of Zakat and Tax, the entity responsible for collecting VAT and excise tax, have told local media that they expect excise tax revenues of $1.87 billion (SR7bn) in just six months.

While in March, UAE Federal National Council, Minister of State for Financial Affairs Obaid Al Tayer said tax on tobacco is expected to bring in $545 million (AED2 billion) in annual revenues, he gave no revenue estimate from the soft drinks segment.

In April, Adrienne D’Rose, senior manager, Deloitte, who attended the Ministry of Finance briefing on excise tax, told Arabian Business that the excise tax will be payable monthly by registered businesses, on the 15th day of the following month and companies that resort to “stockpiling” will face penalties.

Brian Conn, partner, tax advisory services, BDO, told this website earlier that the issue of increasing price or absorbing VAT/excise tax will be a major concern for companies selling small value items.

Arabian Business has approached a number of global energy and soft drink manufacturers for comments.

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