RIYADH: Saudi Arabia is slated to impose hefty taxes on tobacco products, sugary soft drinks, and energy drinks in the quarter starting in April. A 100% tax will be placed on cigarettes and energy drinks, as well as a 50% tax on soft drinks. These taxes were first proposed by the Gulf Cooperation Council in 2015, but Saudi Arabia only recently signed an agreement to put them into effect. The kingdom is also the first GCC member to announce a specific timeline for the implementation of the taxes. In addition to these taxes, the new budget has called for a number of other significant changes, including a 5% value-added tax to be applied on certain goods, stemming from the collapse in oil prices.
Saudi Arabia is the largest oil exporter in the world, and is the biggest economy in the Arab region. However, its coffers have taken a hit amid the oil price free-fall, with the price per barrel dropping from $115 in mid-2014 to the early $50s range currently. Prices dipped to the mid-$20s range in January 2016, hitting 12-year lows. As a consequence of the low oil prices, Saudi Arabia posted record high budget deficits of $98 billion in 2015, with an expected $87 billion deficit forecast for 2016. This forced the kingdom to announce its ambitious agenda, called Vision 2020, aimed at reducing its high dependence on oil by changing the way it generates its income.