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GCC Countries

Cigarette tax to rise 100 per cent

The tax on cigarettes is expected to be hiked 100 per cent this year as part of a selective tax agreement agreed last year by the Gulf Cooperation Council (GCC) to raise the price of goods deemed unhealthy, the Times of Oman said.

Cigarettes, alcohol and unspecified other unhealthy products have been targeted by the Finance Ministry for the tax increase this year, the Times said. The rationale for the stiff duties is that use of unhealthy products raises healthcare costs for governments, the newspaper said.

The 2016 selective tax agreement by GCC member states Bahrain, Kuwait, Saudia Arabia, Qatar, Oman and the United Arab Emirates calls for comparable duties on products deemed harmful to human health and the environment. For example a 100 per cent tax was approved for tobacco products and high energy drinks sold in member countries, while soft drinks face a 50 per cent tax.

Price hike alert: GCC gears up for higher taxes on tobacco, soft drinks, luxury cars

New taxes will be added to the existing ones, which are 100 percent on tobacco and alcohol, and that the total taxation on such products will become 200 per cent. (Pixabay)

The six-nation Gulf Cooperation Council (GCC) is gearing up to double the taxation on certain items like cigarettes in the coming months.

The GCC will gradually implement a selective tax on 93 commodities starting the second quarter of this year and expand to cover all member countries by the beginning of 2018, said Abdulrahim Al Naqi, secretary-general of the Federation of Chambers of GCC.

According to the Saudi budget document published recently, “the GCC countries have already agreed to implement selective taxes on tobacco, and soft and energy drinks during the current fiscal year 2017″.

Al Naqi revealed that the list of items that will be taxed includes energy drinks, tobacco and luxury cars. He explained that each GCC country will determine the value of its own selective tax.

Khaleej Times has further learned that the tax will be added to the existing tax, which is 100 per cent on tobacco and alcohol, and that the total taxation on such products will become 200 per cent.

Last week, the Saudi Ministry of Finance clarified that the tax will be imposed only after the ratification of the uniform agreement on selective tax and the issuance of the domestic rules of procedure in line with the decisions adopted by the Supreme Council of GCC leaders. The proposed date for its implementation is April 2017, the statement added.

Al Naqi said there is a need to spread awareness among the region’s residents as well as the private sector before the implementation of the decision.

The UAE currently imposes 100 per cent tax on tobacco products. The GCC tax code includes 50 per cent taxes on soft drinks and 100 per cent taxes on power drinks, tobacco and its derivatives.

By Mustafa Al Zarooni

Will a 100% rise in tobacco taxation help quit smoking?

It will happen in 2017. GCC countries are in the process of determining the value added tax on tobacco imports.

Tax on tobacco in the six-nation Gulf Cooperation Council (GCC) will go up from 100 per cent to 200 per cent in 2017. Governments hope to encourage more citizens and expatriates to kick the habit of smoking, Obaid Humaid Al Tayer, Minister of State for Financial Affairs, has said.

He announced this after attending a Federal National Council session.

In the 101st meeting of the Financial and Economic Committee represented by the ministers of finance and economy in the member states last month, GCC countries had agreed to impose “selective taxation” of 100 per cent on tobacco and its products. This is similar to the 100 per cent customs duty charges in the UAE.

“While there is a problem in collecting the charge on tobacco tax at present, there are some emirates that convert the charge between the local and federal treasury on a fifty-fifty basis,” he said.

He disclosed that the GCC countries are in the process of determining the value added tax on tobacco imports.

An economist, who spoke on the condition of anonymity, said: “The move will support the budgets of the GCC member countries by increasing the revenues through increasing the tax rate as is the case in many other countries.

“The decision will contribute effectively to increasing the prices of tobacco. This will help reduce tobacco consumption on the local level.”

According to the World Health Organisation (WHO), tobacco consumption is one of the largest public health hazards the world has ever had to confront. Over 5 million people are killed each year – an average of one human every six seconds.

More than 80 per cent of the 1 billion regular smokers around the globe live in low- and middle-income countries. It is in these countries where the burden of tobacco-linked diseases and death is heaviest, according to a WHO report.

According to a study released on the sidelines of the ‘Tobacco or Health’ conference held in Abu Dhabi recently, Kuwait topped the list of GCC countries with the largest number of smokers. In Kuwait, 31.3 per cent of the population smoke; while in Bahrain, 23.8 per cent do. In Saudi Arabia, 22.2 per cent smoke; in Qatar, 19.4 per cent; in UAE, 18.1 per cent; and Oman, 13 per cent.

In Saudi Arabia, six million people are smokers, and cigarette sales in the kingdom are worth $2 billion. In Iraq, 7 million smokers spend $500 million every year on cigarettes.