Distributors pass on 100pc of excise tax to consumers

MUSCAT, JUNE 15 – Notices announcing steep price increases on merchandise subject to excise tax have gone up in supermarkets and retail outlets across the country, presenting consumers with the stark choice of either shelling out considerably more on these less-than-healthy goods that have become the target of the new levy, or to cut down on their intake of these products. The new Excise Tax came into effect yesterday, June 15, requiring consumers to cough up considerably more for carbonated drinks (50pc), energy drinks (100pc), tobacco products (100pc) and special purpose goods — chiefly alcohol and pork products (100pc).

Retail outlets — small and large alike — have priced their fizzy drinks at 225 baizas per can / bottle, up from 150 baizas previously, indicating that the entire 50 per cent additional cost by way of excise duty has been passed on to the consumer. Likewise, tobacco products and energy drinks now attract a 100 per cent excise tax, with customers shouldering the additional levy entirely. A tax expert explained: “It’s inevitable that the Excise Tax will be passed on to the end-user in keeping with the objective behind this new levy. As a tax that seeks to penalise the consumption of products deemed harmful to health and the environment, it makes sense for the additional cost to be borne entirely by the consumer. For this reason, this new tax is also characterised as ‘Sin Tax’ in some jurisdictions.”

However, some pubs and licensed eateries operating as part of luxury hotel properties have pledged to absorb part of the 100 per cent excise tax on special purpose goods (chiefly alcohol) in a bid to retain their customers. “It does not make business sense to saddle our patrons with the 100 per cent tax that has become applicable to special purpose goods. We have to take on at least 50 per cent of this additional cost burden in order to make it less painful for our customers,” a pub manager told the Observer.