50% excise tax likely on fizzy drinks

By Conrad Prabhu — MUSCAT: Jan. 9 – An excise tax proposed in the 2017 State Budget could see carbonated soft drinks becoming pricier by as much as 50 per cent this year.  The cost of energy drinks, on the other hand, could almost double if a proposed 100 per cent excise tax is introduced as well. The levy — part of a package of new tax proposals and tax increases announced in the State Budget — is aimed at bolstering government revenues in the face of a sharp decline in hydrocarbon-based export earnings.
“This is something which governments of the Gulf Cooperation Council (GCC) have been working on for the last few years, and we are told that this is almost ready to be issued in the first quarter of this year,” said Ashok Hariharan, Partner and Head of Tax, KPMG Lower Gulf.
“We understand, based on the statements issued by the Saudi government, that excise tax would be 100 per cent on tobacco, alcohol and possibly energy drinks, and 50 per cent on soft drinks. This will contribute quite a bit to government revenues during 2017,” the tax consultant added in a presentation on the budget delivered at the opening of the annual forum of Oman Society of Contractors (OSC) yesterday.
According to Hariharan, excise tax will be quite distinct from customs duty currently applied to all imports in the country. It is also different from Value Added Tax (VAT) due to be introduced across all six GCC states next year.
While the 50 per cent excise levy on carbonated soft drinks was written into law in Saudi Arabia last week, it will come into force in that country effective from April 1, 2017, according to media reports.  Qatar is expected to shortly follow suit as well, while the other Gulf states, including Oman, will have to first legislate national guidelines before the tax becomes applicable.
With the demand for sweetened fizzy drinks growing in double digits annually, the new tax is likely to dampen consumption of a commodity that is partly to blame for the raging diabetes epidemic in the Sultanate.  The energy drinks market, which has also grown exponentially in the Oman over the last couple of years, is expected to be impacted as well by the proposed 100 per cent excise levy.