UAE approves new 'sin tax' on tobacco and energy drinks

According to the law, tobacco and energy drinks will be taxed at 100 percent, while other soft drinks will receive a 50 percent levy, Abu Dhabi's The National news site reported.

President Sheikh Khalifa bin Zayed Al Nahyan approved the tax decree on Monday.

The new tax will be imposed on manufacturers, most commonly in the form of custom duties. However, it is expected to raise prices in the Emirates.

It has been dubbed as "sin tax" because it applies to products deemed "bad for society".

The move follows in the footsteps of UAE-ally Saudi Arabia, which introduced a similar tax in May.

Imposing the "sin tax" and VAT is one of the steps GCC countries are taking to fight the consequences of continued low oil prices.

The UAE and Saudi Arabia have publicly announced their plans to start implementing VAT from January next year.

Persistently low oil revenues have forced oil-exporting countries to consolidate spending - particularly in the Gulf where citizens have grown accustomed to generous perks and subsidies.

The International Monetary Fund (IMF) estimates VAT will raise regional GDPs by about 1.5 percent.