Dubai: On Tuesday, the UAE’s tax authority announced that a 50 per cent tax would be imposed on carbonated drinks, while energy drinks and tobacco products would attract a 100 per cent tax.
This will double the price of energy drinks and cigarettes overnight.
A plan has been in place for some time now to tax products that are detrimental to health, with the government hoping to generate billions of dirhams of revenue that it will spend on better public services.
Businesses have had several months to prepare their operations for this change.
- The tax is forecast to generate up to around Dh7 billion in annual revenues for the Federal Budget.
- Carbonated water is exempt from the carbonated drinks tax.
- Duty Free purchases at airports will also be exempt from the tax, as long as passengers are leaving the UAE. Passengers who purchase duty free items as they arrive in the UAE will be taxed.
- The revised prices will come into effect from the morning of October 1.
- Additional products may be taxed in the future at rates of up to 200 per cent, but as of now it is just energy drinks, fizzy drinks, and tobacco.
- The UAE’s tax on harmful products is widely considered to be the largest ever implemented.
- When the United Kingdom’s government announced in 2016 that it would be introducing a tax on sugary drinks from 2018, the yearly tax collection was estimated to be £520 million (Dh2.45 billion).
- The financial benefits are more subtle than just revenue generation, however. In 2005, it was estimated by the Centre for Diseases Control and Prevention (CDC) that the medical costs of obesity in the US were an estimated $190.2 billion (Dh698.6 billion), or 20.6 per cent of all medical expenditures.
- These could be avoided if people cut down on sugary products, as the government hopes they will following this tax.