Saudi Arabia’s 50% excise tax on sugar sweetened beverages (SSBs) will not have a long-term effect on consumption or production according to KPMG head of indirect tax, Nick Soverall.
Soverall explained: “The new SSB tax will affect consumption and production in the short- to medium-term due to the lower consumption of sweetened beverages,” adding that customer behaviour will likely stabilise.
The broad definition of an SSB by the General Authority of Zakat and Tax (GAZT) could create different issues explained Soverall.
An SSB is defined as: “any product containing any type of sugar or other sweeteners produced for the purposes of drinking as a beverage whether ready for drinking, or as concentrate powders, gel extracts or any form that can be converted into a drink’ with the exception of certain 100% fruit or vegetable juices and milk and dairy products”.
"As the definition is kept rather wide and generic, there are some potential issues faced by the industry in terms of product classification for tax excise purposes," said Soverall.
When producers go to classify products for tax excise, it may prove difficult to gauge the correct retail price, meaning cash flow could be impacted before classifications are made clearer.