An excise TAX was introduced in 2017 as Saudi and UAE governments came under financial pressure from a sharp drop in oil prices, according to Reuters.
The European Union, Switzerland, and the United States have complained at the World Trade Organization (WTO) about an excise tax imposed by these Arab states on carbonated and energy drinks, according to notes of a WTO meeting and diplomatic sources.
The applied excise Tax law is on certain, “unhealthy,” products which include cigarettes (100%), energy drinks (100%), and carbonated drinks (50%).
Furthermore, these very same complaints come from the fact that Switzerland is a benefactor of cigarette sales, since Phillip Morris, the company behind some of the most known tobacco brands is situated in Nauschel, Switzerland. Coca-Cola, Pepsi Co., and other carbonated soft drinks benefit the US. Finally, Austria, the home of Red Bull, the energy drink, is part of the EU.
It is worth mentioning that the EU does not oppose the idea of a tax but believes the levy is discriminatory because it is based only on the retail price and is not imposed on non-carbonated drinks that contain sugar, said an EU source and two diplomats in the Gulf.
“It makes no sense at all from a health perspective,” said a European diplomat who spoke on condition of anonymity.
Sugar drinks are sometimes abundant in nutrients and vitamins, and we use sugar almost everywhere, although it is unhealthy.
While a Coca-cola has no health benefits, and it can be argued that the 34mg caffeine is beneficial, as mentioned by Livestrong, a dietary website. The safe dosage per day for an adult is 300mg; less than coffee, which has approximately 85mg, and the amount that Cola has, is less than what you need to benefit from this natural stimulant.
How has this impacted their sales?
“The price is high”
The Gulf’s soft drink market, which also includes Qatar, Kuwait, and Oman, was worth $8.4 billion last year, according to market researchers Euromonitor. The tax hit brands such as Coca-Cola, Pepsi, and Red Bull.
The sale of tobacco and related products plummeted 97.2% in January 2018 compared to the same period last year, according to data from the Statistics Centre – Abu Dhabi (SCAD).
According to SCAD, the dramatic decrease of tobacco sales is the highest since the adoption of excise tax in October 2017. as well as price hikes on a number of products “that harm public health” such as soft and energy drinks.
The SCAD statistics show that the tobacco trade also fell to 53.4% in Q4 2017.