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The UAE government has imposed excise taxes on demerit goods (Alcohol, Tobacco and Energy drinks) as of October 1st, 2017. According to The National’s news article that was published on August 7, 2017, the UAE and other Gulf states have agreed to impose VAT and excise taxes as a way to boost government income, and replace income losses from reducing oil prices. Also, according to the IMF, the Arabian Gulf states would have a joint fiscal deficit of more than US$700 billion, between years 2015 and 2019, if they did implement reforms. By implementing taxes the government would have more revenue to spend on the UAE’s needs and would not have to rely solely on revenue collected from the exportation of crude oil and natural gas and tourism.    According to the Gulf news, doubling the prices for cigarettes will support heighten the national health coffers to fund public health services, it will also create a healthier population by decreasing sales of cancer-causing products. The revenue from excise taxes will be used efficiently and effectively, aside from funding the public health services it will also be used to fund tobacco awareness campaigns. The excise taxes placed by the UAE government will have an immensely positive impact on the people of the UAE. “Tobacco taxes are the most cost-effective way to reduce tobacco use, especially among young and poor people”, said the World Health Organization. Rakesh Pardasani, Partner, RSM—Audit & Tax Advisory agrees with the WHO telling the Gulf News “Price elasticity for cigarettes as per studies is 0.4 which means for a 100 percent increase in price, the demand should fall by around 40 percent”.     40 percent decrease in demand for tobacco is a great change, and this is caused by excise taxes which will push smokers into saving money instead of spending them on demerit goods which will decrease their life expectancy, it will also discourage future smokers. At the same time, these taxes will significantly increase the UAE’s Revenue.


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