Saudi Arabia to impose 100% tobacco tax

Dubai: Saudi Arabia will impose a special tax on tobacco and sugary drinks on June 10, as part of a series of steps towards closing a budget deficit caused by low oil prices.

Khalid Khurais, director of the selective tax unit of the General Authority of Zakat and Tax, told Al Arabiya television on Sunday that rules covering the tax were published in the official gazette last week and would take effect after 15 days.

Officials have said they expect to raise between 8 billion and 10 billion riyals (Dh7.8 billion and Dh9.8 billion) annually from the tax, which will comprise a 50 per cent levy on soft drinks and 100 per cent on tobacco and energy drinks.

The tax marks a big change in policy for Riyadh, which has traditionally kept taxation minimal but now plans a series of levies and fees by 2020 to close a budget gap that totalled 297 billion riyals last year. Next January it plans to impose a 5 per cent value-added tax, a much bigger revenue-generating step.

Similar taxes are expected to be introduced in the UAE in the fourth quarter.

For local manufacturers, the tax will be introduced when the product leaves the factory. For international producers, the tax will be enforced when the beverage or tobacco product leaves the port.

“The price of a can of a soft drink is just too cheap. Given how heavily these sugary drinks contribute to obesity, it’s quite sensible,” said Johannes Holtzhausen, CEO of supermarket chain Spinneys.

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