Sin Tax Introduced in Oman

A new 100 percent excise tax has been introduced in Oman, which will be falling under the new Sin Tax regulations. The said Sin tax in Oman will be about deemed harmful products to human health and will be levied on alcohol, tobacco, pork products, and energy drinks.

The tax is also known as an excise tax as it is added to the point of the manufacturer and not the sale, and applies to all those goods that are harmful to both public health as well as the environment. Sin tax has been put in force as the result of a tax agreement by the six-nation of Gulf Cooperation Council.

What is a Sin Tax?

A Sin tax is a type of tax that is leviable on socially harmful goods. It's also known as an excise tax. An excise tax is a type of flat fee imposed on each item on sale, it is collected directly from the wholesaler or producer. Such kind of charge is imposed to discourage people from using undesirable or detrimental products to society. The most commonly taxable goods under the sin tax are alcohol, gambling, cigarettes and pornography, Sugar drinks, etc.

Objective

The Ministry of Health in Oman carried out a health survey wherein they found that more than two-thirds of its population is suffering from diabetes, whereas nearly about one in ten adults smoke tobacco, while some 40 percent of people are exposed to second-hand smoke at home or work.

Sin taxes in Oman and other countries serve two objectives. One is to make undesirable goods so expensive that an average consumer would not buy them and would be forced to give up the bad habit. Second, to make the industries which are producing such goods, pay a higher amount of tax, which indirectly can be used to fund the necessary welfare expenditure. The official UAE government websites mention the purpose of the excise tax saying “to reduce the consumption of harmful and unhealthy products while also raising the revenue for the public welfare services."

Revenues

Now, the cost of a pack of cigarettes in Oman will rise from an average cost of OMR1.2 to OMR 2.4. Talking about Energy drinks, pork products, and alcohol, the prices for these products will also be doubled overnight. Prices for Carbonated soft drinks like Coca-Cola will rise by 50 percent.

There will be a decline in demand for these products and thus will reduce the volume of imports from foreign countries and this, in a nutshell, will lead to an improvement in the sultanate's trade balance.

According to Sulaiman bin Salim Al Aadi, Director General of survey and tax agreements at the Secretariat General for Taxation, It is expected that the introduction of sin tax in Oman will bring it up to OMR 90 to OMR 110 million a year to help balance Oman’s books. The market demand influences these things; hence, the earnings can be affected as per the consumption of the people. Al Adi also added that strict compliance will be done concerning sin tax about whether the suppliers are following the regulations or not.

Although there might be positive reasons for the implementation of sin tax in Oman as well as other countries, certainly these taxes have their downsides as well. These are :

Pros

• They discourage unhealthy lifestyles and behavior.
• The taxes are used for the welfare of society and society's cost.
• They are unpopular with voters.
   

Cons

• The taxes aren’t always high enough to reach the aim.
• They don't ultimately pay for society's costs.
• They are only subjective. Many other harmful products are not taxed.
   

The introduction of a sin tax in Oman is for the advantage of society as well as the environment. However, the cons are that such type of tax is not always helpful for eradicating unhealthy behavior. The regulations in respect of the improvement should be strict enough that people, as well as the suppliers, comply with the law.
 

Sin Tax and Other Countries

Saudi Arabia was the first country to impose a sin tax in June 2017, which was further followed by the UAE and Bahrain covering goods like cigarettes and sugary drinks, and later by Qatar in January, adding pork products and alcohol. Among these Gulf countries, Kuwait has yet to implement any selective tax, but they have an excise tax law covering tobacco and other sugary drinks. One of the main objectives of promoting a sin tax on such products is to promote healthy living and to boost revenue at the same time.

Mexico also imposed a Soda tax in the year 2013, and the UK is also on the verge of imposing a Sugar Tax the main objective behind this is to tackle unhealthy lifestyles and its results such as obesity due to foods and drinks containing a high concentration of sweeteners.

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