Saudi Arabia will impose a 'sin tax' this Ramadan

Saudi Arabia will begin imposing a 100 percent tax on cigarettes and energy drinks and 50 percent on soft drinks in two weeks' time, making it the first Gulf Cooperation Council (GCC) country to impose excise tax known as "sin tax".

The announcement, published in the Saudi Gazette, was made by the General Authority of Zakat and Tax based on a GCC decision taken on 23 May. The tax will come into effect on June 10.

The Zakat Authority is responsible for collecting VAT and ST, ensuring that all taxpayers comply with relevant laws and that no one evades taxes. It applies international standards for tax collection and uses state-of-the-art technology to ensure precision and accuracy, the Saudi Gazette reported.

Registered traders, importers and businessmen who do not present a tax declaration to the authority will be fined between five percent and 25 percent of the tax value.

According to a report by the al-Eqtesadiyah business newspaper, the tax authority expects to earn seven billion Saudi Riyals ($1.87 billion) in excise tax revenues within a six-month period.

The introduction of VAT and ST is one of the steps GCC countries have taken to fight the consequences of low oil prices.

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

"VAT is being introduced to achieve economic diversification in preparation for the post-oil era," UAE finance minister Sheikh Hamdan Bin Rashid Al Maktoum said last week.

The International Monetary Fund (IMF) estimates VAT will raise about 1.5 percent of GDP in the GCC region.