Excise Tax: FAQ’s

There seems to be some confusion about implementation of Excise tax among retailers. While Carrefour is charging new increased rates on energy drinks, Zoom at Enoc gas stations is selling energy drinks at pre-Excise tax rates.

1. What products will be taxed, and by how much?

All carbonated drinks, except for sparkling water, will be taxed at 50 per cent, whilst all tobacco products and all energy drinks will be taxed at 100 per cent, effectively doubling them in price.

2. Why are some shops still selling these items at their old prices?

Retailers can sell their existing stock, which they purchased before October 1, without adding the additional tax on to it. This means that for a few days, and maybe even weeks, some shops won’t reflect the new pricing. But eventually, all shops and restaurants will list their soft drinks, energy drinks, and tobacco products at a new, higher price.

3. Why has the UAE government introduced this new tax?

The purpose of the tax on unhealthy goods is twofold: To both halt the rise of diseases such as diabetes and obesity caused by sugary drinks and cigarettes, and at the same time raise money for the government, which it says will be used to fund public services such as roads and hospitals, following the collapse of oil prices three years ago.

4. Is anything else going to be taxed?

No, not yet. The Federal Tax Authority has not announced any plans to place an excise tax on any new products, although when Value Added Tax (VAT) arrives in January 2018, the price of many products and services will increase by 5 per cent.

5. Will this work?

The jury is out on that. Some experts say that education is key to reducing the consumption of addictive substances like tobacco, while others say that for some people, these products - especially energy drinks and cigarettes - will now be unaffordable and therefore encourage them to cut down or quit.