Tobacco, unhealthy drinks, luxury goods to cost more

MUSCAT: Consumers of unhealthy fizzy and energy drinks may soon have to pay extra for their unhealthy choices as an excise tax targeting harmful items looks set to kick in soon.

The Gulf Cooperation Council (GCC)-wide excise tax is expected to be levied anytime from the second half of this year and can double the price of taxed products. GCC regulations have already been published in the Saudi official gazette and await approval from member states, according to a tax update by audit firm Deloitte.

Tobacco products, alcoholic drinks, fizzy drinks, some foods and select luxury items are all under the radar of tax authorities for levying the excise tax. According to reports, the United Arab Emirates’ Finance Minister had stated that there will be a rate cap of 100 per cent on the original value of the product and that national legislations will further define tariffs imposed on each product.

“Currently, it is in our knowledge that five items will be taxed according to this unified agreement. The anticipated levy rate of soft and fizzy drinks is 50 per cent, while alcohol, tobacco and energy drinks will be imposed with a tax 100 per cent of their original sale price,” Alkesh Joshi, director of Tax at EY said.

“Taxation will begin three months after it is published in the official gazette in Oman. We expect this to happen anytime during the second half of this year.”

Preliminary regulations

Saudi Arabia and Kuwait have already drafted preliminary regulations that are subject to approval by tax authorities. The excise tax will generate income for the government’s strained coffers while discouraging unhealthy dietary habits among Oman residents.

“We expect tax rates to be unified with little or no changes in products or rate levied between countries in the GCC as this may give rise to arbitration. People may start to stock up these items in place where rates are lower and export it to countries that have a higher rate,” Joshi added.

Residents have welcomed the law as smart and as an effective crackdown on harmful products.

“This is an excellent initiative from the government and a need of the hour. This tax law will serve government finances, as well as discourage individuals, especially the youth, who take up activities like smoking and drinking. We have seen European countries tax tobacco products and cigarette sales dropped. We expect the same in Oman,” Abdullah Al Harthy, director of projects at a top firm in Oman, said.

“Anything that can hinder the spread of harmful products is a good law. I am sure paying more is going to reduce sales of these products especially amongst youth who are generally more attracted towards them,” Ahmed Yaqub a businessman and father of three said.