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Sun 1 Oct 2017 10:10 AM

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UAE 'sin tax' comes into effect today

Cigarettes double, soft drinks up by 50%

UAE 'sin tax' comes into effect today
Shopkeeper pictured organising cigarette packs at a shop in in Ras al-Khaimah. Image: KARIM SAHIB/AFP/Getty Images

The UAE’s Excise Tax came into effect today, doubling the price of tobacco and energy drinks, and increasing the price of soft drinks by 50 percent.

Soft drink prices will increase from AED1.50 to AED2.25 while the price of a pack of 20 cigarettes will double from AED8 to AED16.

The so-called “sin tax” is a precursor to the more general VAT on goods and services from January 1.

There were reports over the weekend of shops across the emirates running low on the products, as residents sought to stock up ahead of the change.

However, not all stores today had increased their prices. Under the terms of the law, the retailer is not be liable for the tax if the goods were obtained before the law came into force.

End of an era

The UAE is one of the six GGC states to have agreed to introduce VAT at five percent next year as they seek to revitalise their economies.

The UAE and Saudi Arabia have said they will implement VAT from January 1, 2018, while the other GCC states of Bahrain, Kuwait, Oman and Qatar are expected to follow suit during the year.

Economies in the Gulf -- home to the world's biggest exporters of oil and liquefied natural gas -- took a major hit after a global supply glut triggered a drop in prices in 2014.

Governments across the region have also drawn hundreds of billions of dollars from their massive sovereign wealth resources in an attempt to curb the deficit.

The six states are now taking austerity measures a step further with the plan to introduce VAT, ending their decades-old reputation for being tax havens.

Accounting and consultancy firm Deloitte has said the progressive implementation of VAT from next year "marks the start of some of the most exciting, dramatic and far-reaching socio-economic changes in the region since the discovery of oil" more than half a century ago.

*With AFP

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