UAE’s excise tax on sugar-sweetened beverages: A good decision, but maybe needs a better approach?

Non-communicable diseases (NCDs) remain a substantial health and developmental challenge in the UAE. NCDs include cardiovascular and chronic respiratory diseases, cancers, and diabetes. NCDs result from different factors, mainly obesity. According to the World Health Organization (WHO), in 2018, the NCDs accounted for 77% of all deaths in the UAE.

In this context, the UAE government must take active measures to curb such diseases. And in its efforts to address them, the UAE government has been levying health-related taxes on specific items since 2017.

On October 1, 2017, the excise taxes have been levied across the UAE with a rate of 50% on carbonated drinks, 100% on energy drinks, and 100% on tobacco and its products. Consequently, a research from London-based Euromonitor International showed that the excise taxes on energy drinks resulted in a 65% drop in the sales of the energy drinks companies in the UAE.

Later on August 20, 2019, the UAE included all forms of sugar-sweetened beverages (SSBs), and electronic smoking appliances and liquids under its 2017 excise taxable products list. With these amendments, starting from January 1, 2020, the SSBs will be taxed at a rate of 50% and the electronic smoking appliances at a rate of 100%.

A very interesting thing to notice here is that all the mentioned taxes are on the sales-value, including the SSBs. But, in reality, all the SSBs vary in their sugar content, right? Then how to tax them equally?

Taxing the SSBs is, in fact, a good decision. But still, the UAE government that aims to prevent chronic diseases linked to sugar and tobacco, when taxing the SSBs may consider revising the announced approach that can bring different implications to the consumers and producers, and it may adopt the sugar-content based tax approach that will yield benefits.

SSBs that are taxed on sales-value affect everyone regardless of their lifestyle choices. So even if I eat a well-balanced diet, and play sports, when consuming SSBs in my weekends, I will need to pay more to do so.

In contrary, SSBs that are taxed on sugar-content bring results to different actors:

• From the consumer’s perspective: when the drinks with the most sugar are taxed the most, it encourages the consumer to switch to cheaper drinks that are less in sugar content.

• From the companies/producers’ perspective: this approach will encourage and incentivise the companies to endeavour to reduce sugar content and pay less taxes, as well as come up with healthier products. Indeed, this will make the beverages industry a healthier one.

• From the healthcare industry actors’ perspective: this approach will allow a proper health track, as they will easily correlate consumers’ sugar intake to their health outcomes.

Many may question if the sugar-content based tax is a feasible approach or no. Well, yes, it is. There are different successful examples of countries that have already enacted SSBs taxes based on sugar-content. Hungary, for example, has a one-tier levy that taxes drinks with relatively high sugar levels. The UK recently announced a two-tier levy through which it taxes moderate-sugar drinks at one price and high-sugar drinks at a higher price.

Finally, here are a couple of recommendations to the policymakers in the country that may complement the health-related taxes.

• Sugar is not the only or the actual cause of the NCDs that the UAE government is trying to control. Therefore, there is a need to have UAE-focused studies in the broader diet and sugar intake. For instance, the health authorities in Singapore have identified that white rice is the leading cause of diabetes in the country, rather than sugar. So, UAE-focused studies will help in understanding the national health problem and will lead to an effective solution.

• The UAE needs to continue with the awareness-raising campaigns that educate the society on the importance of a balanced diet and regular physical activities.

• There should be a balance in the price graph. So, the UAE, while increasing prices of certain unhealthy products, should decrease the prices of healthy and diet products or any healthy alternatives. This can promote a healthy lifestyle and consumption.

• Targeting only one group of food, and in this case, the sugary beverages doesn’t guarantee to resolve the health issues in the UAE. Hence, if the UAE aims to promote its population health, then, junk food taxes should be considered too. Nevertheless, the question will remain if the government will tax all its ingredients or will tax the final product.