The UAE will be the second country in the region after Saudi Arabia, to implement taxes on tobacco and energy drinks. The Emirate will introduce excise tariffs at a rate of 100 percent on tobacco and energy drinks, and 50 percent on sugary drinks by the end of the year, confirmed Sheikh Hamdan bin Rashid Al Maktoum, Deputy Ruler of Dubai, UAE Minister of Finance, and Chairman of the Federal Tax Authority:
This tax is set to discourage the consumption of products that negatively impact the environment and, more importantly, people’s health, while the revenues it generates will go towards supporting advanced services for all members of society.
The new measure will affect more than 200 companies that manufacture, import or store products subject to the new regime. The tax registration opens in September at the Federal Tax Authority. While in many countries the amount of the tax on these products is based on the amount of content of sugar or tobacco, in the UAE it will be calculated as a percentage of the retail sale price.
The tax reforms in the region will continue during the next year as well. As of January 1, a GCC-wide rate of 5 percent VAT will be implemented. According to the International Monetary Fund, it will boost GDP by 1.5 percent. H.E. S Sultan Al Mansouri, the Minister of Economy in the UAE added that the VAT might generate Dh12 billion in its first year and Dh20bn in 2019.