UAE's new federal tax came into effect today (October 1), doubling the price of tobacco and energy drinks, and increasing the price of soft drinks by 50 per cent, said a report.

The price of sodas is expected to increase from Dh2 ($.54) a can to Dh3 ($.81). Cigarettes will now cost around Dh20 ($5.4), depending on the brand, and energy drinks will cost around Dh16 ($4.3). The tax will be implemented in shops, supermarkets, restaurants and hotels, or anywhere else these products are sold in the UAE, said a report in Gulf News.

Following over two years of consultations with the private sector, the tax taking effect on Sunday, called the Excise Tax, is the first of two planned for the UAE, the report said.

The second tax, called the value-added tax or VAT, is set to be introduced on January 1, 2018, at a rate of 5 per cent.

Health is wealth

Amidst an ongoing health crisis in the Gulf region that has seen cases of diabetes, obesity, and heart disease soar, the government has sought to reduce the consumption of harmful products through this excise tax on sugary drinks and tobacco.

The World Health Organisation (WHO) is lauding countries such as the UAE for imposing heavy excise taxes to curtail tobacco demand and boost healthy behaviour.

With obesity rising at an “alarming” rate in the emirates, according to a UAE University study conducted on children last year, the economic impact of improving citizens’ health and reducing the burden on the public health system could benefit the country for many years to come.

Modernisation

In a historic pan-Gulf decision, the six countries of the GCC decided to introduce taxes, in order to bolster state revenues and continue along the path of rapid development and modernisation.

According to UAE government estimates, the tax is forecast to generate around Dh7 billion in annual revenues for the Federal Budget.

Other countries, such as the UK, are planning to implement similar taxes on sugary drinks, the report said.