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EU calls tax on carbonated and energy drinks “discriminatory”

Decline in sales for some EU products because of the tax

Gulf News

Abu Dhabi: Excise tax imposed by the governments of the UAE, Saudi Arabia and Bahrain on energy and carbonated drinks are discriminatory and do not cover all products which have high sugar content, a senior official of the European Union told Gulf News.

“We are not against as such the idea of the governments to promote healthy lifestyle and reduce obesity by imposing taxes on sugary drinks,” said Taina Sateri, trade counsellor at the Embassy of European Union in Abu Dhabi.

“What we feel is the present tax system is a bit discriminatory as far as the range of products is concerned. There are some drinks with much higher sugar content and are not taxed but at the same time some drinks which do not have almost any sugar content are taxed.”

The trade counsellor made the comments after complaints were made by the European Union, Switzerland and the United States at the World Trade Organisation about the imposition of the tax on carbonated and energy drinks in the UAE, Saudi Arabia and Bahrain.

A Reuters report quoting a Geneva trade official said the United States called on the three countries to repeal the tax and urged other countries not to implement it, while Switzerland asked Gulf finance ministers to consider modifying the tax.

The UAE, Saudi Arabia and Bahrain started implementing excise tax since October last year to increase revenue as well as to promote healthy living among people.

All carbonated drinks, except for sparkling water are being taxed at 50 per cent, while energy drinks as well as tobacco products are taxed at 100 per cent.

According to counsellor Sateri, 100 per cent tax rate on energy drinks is too high, not seen in any other country across the globe.

“World Health Organisation normally speaks about 20 per cent rate but it is 100 per cent here. What we heard from the industry is that people are changing their consumption for products, which are not taxed. There is a real decline in sales for some EU products because of this tax.”

The EU also considers that such tax should be based rather on volume than retail price as in other countries which have implemented such tax.

“Concerning the tobacco, the excise tax rate is also 100 per cent. There are products in the market sold in shops with the price even lower than the set excise tax. Therefore the consumers are looking now for the cheaper products rather than products which have legally arrived and paid the excise tax thus pushing out the high brand cigarettes from the market.”

The European Union has written to different authorities on this and is waiting for a response.

“We are also hoping to organise some meetings to engage bilaterally in these countries.”

Federal Tax Authority or the Ministry of Finance in the UAE did not get back to Gulf News when requested for a comment.

Energy drink Red Bull on the other had welcomed calls to review the GCC excise tax on energy drinks saying it would be unjustifiable and discriminatory to treat energy drinks any differently to other beverages containing sugar and caffeine.

“A 250ml can of Red Bull energy drink contains 80 mg of caffeine, about the same as a cup of coffee, and the same amount of sugars as in a conventional soft drink,” Red Bull said in a statement.

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