The Saudi Arabia government has decided to impose a sin tax on cigarettes, energy drinks and carbonated drinks from June 10, becoming the first country in the Gulf Co-operation Council to fix the implementation date.

On May 23, the decision was taken by the General Secretariat of Gulf-Cooperation Council to impose 100 per cent tax on cigarettes and energy drinks and 50% on carbonated drinks. The Zakat Authority is responsible for collecting VAT and ST and ensuring that there are no tax evaders. It applies international standard for tax collection and uses the best mechanism to ensure that every detail is considered and precision is maintained for accurate data collection. 

The law further mandates that if registered people fail to present tax declaration to the General Authority of Zakat and Tax, they will be penalised with a fine ranging between 5% and 25% of the tax value. According to a report by the al-Eqtesadiyah business newspaper, this move with help the tax authorities to earn seven billion Saudi Riyals ($1.87 billion) in excise tax revenues within a six-month period. the VAT and the ST tax have essentially been introduced in the GCC countries to fight the repercussions of low oil prices. The UAE and Saudi Arabia have publicly announced their plans to implement VAT from January next year. Speaking to media last week,  UAE finance minister Sheikh Hamdan Bin Rashid Al Maktoum said, "VAT is being introduced to achieve economic diversification in preparation for the post-oil era."

As per the International Monetary Fund, VAT is likely to raise about 1.5 per cent of GDP in the GCC regions. Although the VAT implementation date is 1 January 2018, full implementation is expected only by 1 January 2019.