World Economy

(P)GCC Imposes 100% Tax on Drinks, Tobacco

 (P)GCC Imposes 100% Tax on Drinks, Tobacco (P)GCC Imposes 100% Tax on Drinks, Tobacco

Consumers of tobacco, energy drinks and soft drinks will have to gear up to pay a lot more as the (Persian) Gulf Cooperation Council countries have decided to impose steep taxes on these products.

The group will impose a uniform tax of 100% on tobacco products, 100% on energy drinks and 50% on soft drinks, Arabian Business quoted local media as saying.

The committee on financial and economic cooperation was mandated to complete all necessary requirements for the decision in preparation of its signing by mid-2016 and approval in early 2017.

Tax reform in the (P)GCC region (Bahrain, Kuwait, Oman, Qatar, Saudi Arabia, and the UAE) is a matter of time and Saudi Arabia is not immune, according to the Deloitte statement issued recently.

Saudi Arabia is committed to the Base Erosion and Profit Shifting initiative and the Organization for Economic Cooperation and Development action plan.

“National tax laws have not always kept pace with global corporations, fluid movement of capital, and the rise of the digital economy, which leaves gaps and mismatches that can be exploited to generate double non-taxation,” according to the OECD website. BEPS refers to tax planning strategies that exploit the gaps and mismatches in tax rules to artificially shift profits to low or no-tax locations where there is little or no economic activity, resulting in little or no overall corporate tax being paid.

“Measures are currently on foot for a reform of its taxation system with the proposed introduction of formal transfer pricing rules and other changes to the tax system such as the potential introduction of Value Added Tax along with other (P)GCC countries,” Deloitte stated.

The report said factors included the decline in oil prices, a drop in other commodity prices, low global interest rates, a declining gross domestic product in China, the recession in Brazil, and emerging markets. Put together, the report said these factors could lead to a “possible downturn” in (P)GCC.