New UAE tax raises price of some products by 200 percent

The United Arab Emirates has announced that it will be imposing a “selective tax” on tobacco, sugary drinks and other products starting on 1 October. The so-called “Excise Tax Law” targets products deemed to have a negative impact on the environment and people’s health.

It will be in effect inside the UAE as well as at airports and duty free zones. It can increase prices by up to 200 percent in some cases.

The UAE’s Excise Tax Law comes only a few weeks after the beginning of the implementation of the same increase in Saudi Arabia.

It is a sales tax that will affect retail prices, which means that consumers - not importers or vendors - will cover the increase.

“The Excise Tax, which in itself is an indirect type of taxation, will help build a healthier and safer society,” the UAE’s official news agency WAM said.

The law, which was signed by the president, stipulates that the UAE’s cabinet will specify the tax rates for "unhealthy" and luxury products, including tobacco, as long as they do not exceed 200 percent of the price.

Younis Haji al-Khouri, the UAE's undersecretary at the finance ministry, told WAM the law would "reach 100 percent for tobacco and energy drinks and 50 percent for sugary fizzy drinks".

Khouri said the taxes will be levied on travellers coming into the country if they are bringing in such goods.

WAM said the new tax will generate $1.9bn annually, which will go to “supporting advanced services for all members of society”.

On 11 June, Saudi Arabia started implementing a similar law that imposed the same tax rates on "unhealthy" products.

Saudi Arabia said the new tax was imposed because of the high consumption of such products and the costs of their effects on the government and individuals.

However, the tax sparked a wave of criticism in Saudi Arabia because it caused a significant rise in the prices of these commodities.