Cigarette Smokers In Saudi Arabia Will Now Have To Pay A 'Sin Tax'

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The country is set to impose a 100 percent excise tax on tobacco products and energy drinks, along with a fifty percent tax on soft drinks.

On May 27, the Saudi General Authority of Zakat and Tax announced a set of new taxes to be imposed on products such as soft drinks, energy drinks and tobacco.

Known as the “sin tax,” the policy is to  be implemented from June 10 onwards will see a 100 percent excise tax on tobacco products and energy drinks, and a fifty percent tax on soft drinks. The announcement comes merely a few days after the UAE Federal Tax Authority (FTA) said it will impose excise tax on tobacco products, energy drinks and soft drinks.

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According to Al Eqtesadiyah, an Arabic business daily newspaper, Zakat Authority officials claimed the excise tax revenues will reach $1.87 billion in just six months.

"If registered people (traders, importers etc.) fail to present a tax declaration to the General Authority of Zakat and Tax, then they will be penalized by a fine ranging between 5 percent and 25 percent of the tax value," Saudi Gazette reported.

It is known that other Gulf Cooperation Council countries are also planning to implement the taxes, but no dates have been revealed as of yet.

Authorities have stated that the tax will be calculated as a percentage of the retail sale prices (RSP). 

Apparently, the introduction of VAT and ST is a step taken by the GCC countries to balance out the effects of low oil prices.

"VAT is being introduced to achieve economic diversification in preparation for the post-oil era," UAE finance minister Sheikh Hamdan Bin Rashid Al Maktoum said.

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