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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)

http://www.albawaba.com/business/cigarette-tobacco-gcc-tax-price-hike-soft-drinks-luxury-cars-923098

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

UAE looks at levying fee for remittances

http://www.thenational.ae/uae/uae-looks-at-levying-fee-for-remittances

ABU DHABI // Expatriates may be asked to pay a government tax on money they send back home.

The Minister of State for Financial Affairs, Obaid Al Tayer, said on Tuesday a study was under way on whether to levy a charge on remittances.

“It is in its first stages,” Mr Al Tayer said. “No decision has been made with regards to this.”

He said further studies would be needed on factors including social and economic effects, and that a draft law had yet to be considered.

The UAE is also looking at doubling the tax on tobacco by 2017, in line with the GCC, and reviewing corporate tax laws.

And a Gulf-wide value-added tax could be in place within three years after the six countries adopted a draft framework in May.

But Mr Al Tayer ruled out introducing income tax.

“There is not any intention or study regarding placing taxes on the incomes of individuals at all. There is not any draft law or decision regarding this matter,” he said.

“As per the constitution, no tax will be imposed without a law. This is a clear clause.”

Mr Al Tayer on Tuesday appeared before the Federal National Council, which passed the federal budget for next year.

Forecast revenues for the year will reach Dh48.57 billion, as will expenditure.

The FNC also discussed the tobacco tax, which member Abdul Aziz Al Zaabi said would generate Dh6bn a year after it was increased. Levied on importers, it will double to 200 per cent of import duty by the start of 2017. The extra revenue will go into the federal budget, not the emirates’ budgets as it does now.

“Just by the UAE entering the GCC Customs union, there was a cancellation of the law issued in 1981 regarding tobacco tax, which said that the 100 per cent is divided between local and federal governments,” Mr Al Tayer said.

“Therefore, the federal government does not receive a mentionable amount.”

Mr Al Zaabi argued that on top of tobacco revenues, emirates other than Abu Dhabi and Dubai should start contributing to the federal budget, and resources other than oil should be used to finance it.

Mr Al Tayer said that all local governments would have to contribute the extra tobacco tax revenue to the federal coffers.

The value-added tax is not expected before 2018, if it is approved, and even then there will be a trial period of at least 18 months so businesses can become accustomed.

Mr Al Tayer would not speculate on the percentage of tax levied on products or what has been agreed on already, but he said “the picture will become clear for everyone” in the first quarter of next year.

This month the Ministry of Finance said 94 basic food items would be exempt from the tax, as would health care, education and social services.

Meanwhile, the draft law for corporate tax is in its preliminary stages and discussions are continuing, although Mr Al Tayer stressed that “no agreement has been reached until now”.

He told the FNC that the decreasing oil prices did not affect the budget that was approved in July.

“The federal budget is not connected with the price of oil, because the revenues of the budget are financed by contributions from the emirates of Abu Dhabi and Dubai,” Mr Al Tayer said.

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