Why the UAE needs a sugar tax — and what it means for your shopping bag

From sodas to juices, prices and recipes are set to change under the UAE’s new tax model

Last updated:
Justin Varghese, Your Money Editor
3 MIN READ
The new model aims to incentivise manufacturers to reduce sugar levels in their products, encouraging healthier dietary choices among consumers.
The new model aims to incentivise manufacturers to reduce sugar levels in their products, encouraging healthier dietary choices among consumers.
Gulf News archives

Dubai: You might want to look twice at that bottle of soda in your trolley. From January 2026, the price tag could depend on how sweet it is.

The UAE is overhauling how it taxes sugary drinks. Instead of the flat 50 per cent excise duty that’s been in place for years, a new system will kick in — one that taxes beverages based on their actual sugar content. The more sugar inside, the higher the tax. Less sugar means less tax.

The aim is simple: encourage people to make healthier choices, and push companies to make their drinks less sugary. The Ministry of Finance and the Federal Tax Authority say the new model will start at the beginning of 2026, reshaping how soft drinks, juices, and energy drinks are priced across the country.

Moving beyond a one-size-fits-all tax

Until now, every sweetened drink was treated the same — whether it had five grams of sugar or fifteen. That made little sense. Companies that invested in healthier formulas paid the same tax as those that didn’t reduce sugar.

The new model changes that. Drinks will be taxed on a sliding scale tied directly to their sugar levels. A heavily sweetened cola will face a higher rate than a lightly sweetened iced tea. And if a brand offers a zero- or low-sugar version, that product could be noticeably cheaper on shelves.

It’s a practical way to reward healthier manufacturing while still giving consumers choices. In other words, it’s not a ban — it’s a nudge.

Health, market incentives in one shot

This isn’t just about prices. It’s about behaviour. Several nations now face growing rates of obesity and diabetes — conditions strongly linked to high sugar consumption. Sugary drinks are among the biggest culprits because they’re easy to overconsume.

By changing how these drinks are taxed, governments have been tackling the issue from both sides. For shoppers, higher prices may push people toward lower-sugar alternatives. For producers, the new structure creates a financial reason to reformulate recipes and cut sugar levels.

The UK recently saw a similar shift when it introduced its own tiered sugar tax. Beverage makers there slashed sugar content by around 40 per cent in many drinks just to stay in lower tax brackets. The UAE hopes to spark that same industry-wide rethink — a healthier market, led by pricing.

How it affects your next grocery run

Come 2026, the soft drink aisle will look different. Regular, full-sugar sodas and energy drinks will likely go up in price. Mid-range sugar products might stay roughly where they are. Sugar-free and “zero” variants could become the most affordable options.

It’s not just about the can you grab today — it’s about how shopping habits might change over time. Families who stock up on juices and sodas every week will start noticing small savings from picking the lower-sugar versions. Over months, that difference adds up.

UAE retailers and distributors will also have some adjusting to do. The tax authority has built in a deduction for companies that already paid the old 50 per cent excise on unsold stock that will be taxed lower under the new rules. That softens the financial hit, but the logistics will still be complex: relabeling, reclassifying inventory, and updating systems to reflect the new tax tiers.

Fairer system, new shopping mindset

The earlier “flat” tax system treated all drinks equally, which wasn’t exactly fair. Now, the government is aligning taxation with actual sugar content — a move that makes fiscal sense and health sense. It also sends a signal to global manufacturers: make healthier products, and you’ll pay less tax.

For shoppers, the change makes the label as important as the price tag. You’ll start noticing sugar-per-100ml figures when choosing between two similar-looking bottles. That’s the kind of subtle behaviour shift policymakers are betting on — small, everyday choices that gradually change consumption patterns.

Bigger picture?

The UAE’s sugar-tax overhaul puts it in step with global public-health trends and ongoing GCC efforts to harmonise excise frameworks. It’s part of a wider push to use tax policy not just to raise revenue but to influence healthier lifestyles.

Will it work? That depends on how much consumers care about the price gap. Some will pay more to stick with familiar brands; others will shift to zero-sugar options if the savings are clear. Either way, the policy will reshape what’s on the shelf — and what lands in your shopping bag.

So when the new tax takes effect, expect more “light,” “zero,” and “no added sugar” labels crowding the fridge doors. Your favourite drink might taste the same — but your wallet, and your health, could feel the difference.

Related Topics:

Sign up for the Daily Briefing

Get the latest news and updates straight to your inbox

Up Next