New taxes to boost revenue, reduce lifestyle diseases

MUSCAT, MARCH 16 – Come June 2019, the Sultanate will come under a new era of taxation which is expected to change not only the consumer behaviour but also strengthen the fiscal growth in the country. The selective tax or ‘sin tax’ will be slapped on tobacco products, alcoholic beverages and energy drinks following the promulgation of Royal Decree making it a law by His Majesty Sultan Qaboos. When implemented, prices of these commodities will nearly double as they will come under an excise tax of 100 per cent. Fizzy drinks will come under a tax of 50 per cent.
According to experts, the new law will not only expand the tax base by providing the state coffer with millions of rials every year, this will also help the government combat the ever rising number of lifestyle diseases.
Dr Saleh bin Said Masan, head of the economic and financial committee at the Majlis Ash’shura, said that the new taxes would help the government fetch an additional revenue of approximately RO 100 million annually.
“Apart from strengthening the general budget with the expansion of the tax net, the new law will bring positive impact on the public health and environment”, he said.
According to him, the use of commodities under the new tax will have a substantial fall of almost 15 to 20 per cent.
The sin tax idea was conceived after Gulf Cooperation Council members agreed to take collective steps to tackle unhealthy lifestyles in the region.
According to a statement following the ratification of the new law, the tax is intended to control to the use of goods that do damage to public health or the environment.
“The selective tax law seeks to achieve promotion of healthy lifestyles by amending the consumption pattern of individuals and also creating an additional resource for public finances,’’ the statement said.
According to Lo’ai B Bataineh, Chief Executive Officer at Ubhar Capital, it is like killing two birds with one stone.
“The implementation of the selective tax will meet two policy objectives — raising government revenues and discouraging consumption of goods that are considered harmful to health and the environment”, said Bataineh.
Amidst the rising concern over surge in chronic diseases like diabetes, obesity and cardiovascular illnesses, the new tax will help the government cut consumption of harmful products, he said.
A survey by the ministry of health brought to fore the
fact that more than two-thirds
of Oman’s population is in the
grip of diabetes. While one in 10 adults smoke tobacco, a close to
40 per cent are hit by passive smoke.
The number of people with diabetes has exceeded 66 per cent. In addition, the percentage of people with diabetes in 10 years during the period from 2008 to 2018 has increased to more than 3 per cent, with more than 7,500 diabetics annually.
Bataineh said that implementation of taxes needs to be accompanied by revenue protection and anti-smuggling measures.
“With the prices of tobacco and alcohol expected to double, it is likely that smuggling of these commodities can rise. So adequate steps must be taken to guard against such activities”, he opined.
While promoting healthy living, the tax is a way to boost revenue as well, said Jose Chacko, Partner, Forensic Technology Services, Crowe Oman.
“Originally decided by the GCC member countries as unified selective excise tax to deter the consumption of harmful commodities, the tax can also serve as a significant means to supplement tax revenues”, he said.
Imposing such a tax was critical due to the effect such commodities have on public health and the environment. This will also help cut spending on healthcare needs, he said.
The World Health Organization says high taxation is one of the few effective measures to make people quit the use of several unhealthy and harmful commodities.
Saudi Arabia was the first to impose the tax in June 2017, followed by the UAE and Bahrain later that same year, covering cigarettes and sugary drinks.
Qatar implemented its tax in January, adding pork and alcohol. Kuwait has yet to implement any selective tax, but its excise tax law draft said the covered goods would be tobacco, and energy and soft drinks.