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Saudi "sin tax" targets cigarettes to raise funds

Monday, June 12, 2017 - 01:50

It’s now more expensive to smoke or have fizzy drinks in Saudi Arabia.The country’s introduced heavy taxes on the two, as it seeks to cut its huge budget deficit, which hit $79 billion last year. From Dubai, Nawied Jabarkhyl reports.

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From this week, smoking's a more costly habit in Saudi Arabia. The country's doubled the prices of tobacco products, in a bid to raise money. A pack of cigarettes now costs almost $5.5 Still low by international standards, but residents seemed to have mixed views on the changes. (SOUNDBITE) (English) ENGINEER IBRAHIM MOSA, RIYADH RESIDENT: "It's a good step and a very positive one for the community and individuals. Both cigarettes and soft drinks are harmful to health, so this is supposed to encourage us to leave them and save the money we spend on other, healthy things." (SOUNDBITE) (English) FAHAD AL-AJMI, RIYADH RESIDENT: "Personally, it affects me both financially and physically, that's for sure. But, God willing, I can stop smoking hopefully." The new sin tax also affects sugary drinks. Soft ones like Pepsi will be 50% more expensive, with energy drinks twice as pricey. The Saudi government says it expects to raise at least $2.1 billion a year from the move. (SOUNDBITE) (English) KHATIJA HAQUE, HEAD OF MENA RESEARCH, EMIRATES NBD: "If you look at 2014, about 85% of Saudi's revenue came entirely from oil, so obviously, it makes them vulnerable to volatility in oil prices. And with the sharp drop that we've seen in the last couple of years, it's had a big impact. So, the strategy goi ng forward not just for Saudi Arabia but for the rest of the GCC as well, is to diversify the sources of their revenue, and that means relying more on investment income, as well as non-oil tax income or fee income." The IMF has been a strong backer of the new fees, saying all six countries need to diversify their economies, and build up the "culture of a modern tax system." Times are changing here in the Gulf region. Kicked into action by low oil prices, governments are looking for new ways to fund their spending - and their populations seem like a good place to start.

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Saudi "sin tax" targets cigarettes to raise funds

Monday, June 12, 2017 - 01:50