To improve public health and generate income, the United Arab Emirates (UAE) implemented a sin tax, also known as an excise tax, on cigarettes, energy drinks, and carbonated beverages. The tax becomes effective on October 1st, 2017. It is a part of the government’s aim to diversify its revenue streams and lessen reliance on money from oil.
Pros of Sin Tax:
The consumption of harmful goods that might cause diseases like obesity, diabetes, and heart disease is decreased because of the sin tax. Moreover, it encourages UAE customers to switch to healthy options like water or juices.
Nowadays, it brings in a lot of money for the UAE, which is used in areas like healthcare and education. The sin tax brought in AED 2.48 billion in income in 2020, up from AED 2.2 billion in 2019, according to the UAE Federal Tax Authority (FTA).
Cons of Sin Tax:
The sin tax is allegedly regressive because it disproportionately harms low-income populations that lack access to better options. Opponents assert that the levy may boost product smuggling and illicit trade in taxed goods.
Sin Tax Rate:
According to Cabinet Decision No. 52 of 2019 on Excise Goods, Excise Tax Rates, and Methods of Calculating the Excise Pricing, the sin tax rate is as follows:
| Goods | Sin Tax Rate |
| Carbonated Drinks | 50% |
| Tobacco Products | 100% |
| Energy Drinks | 100% |
| Electronic Smoking Devices | 100% |
| Liquids for Smoking Devices | 100% |
| Products with added sugar | 50% |
Comparison with VAT:
The value-added tax (VAT) that the UAE implemented on January 1st, 2018 is different from the sin tax. Whereas the sin tax exclusively targets specific items due to their detrimental effects on society and health, the VAT is a broad tax on goods and services.
Other Countries with a Sin Tax:
A sin tax has been enacted in several nations before the UAE. Several nations, such as the United States, Canada, and Australia, have enacted comparable levies under different conditions. The goal is to reduce the use of alcohol, sugary drinks, and cigarettes.
Similar to this, other members of the Gulf Cooperation Council (GCC) also levy sin tax under a different name. Saudi Arabia, Oman, Bahrain, and Qatar are a few of these.
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