Bahrain's Cabinet has approved the draft law ratifying the Gulf Cooperation Council (GCC) unified excise tax, the kingdom's official news agency stated.

The Cabinet has endorsed a selective excise tax bill that would impose a 100 percent tax on tobacco products, energy drinks and harmful goods to human health, as well as a 50 percent tax on carbonated beverages.

The bill also regulates tax registration and retrieval, exemption cases, and tax evasion procedures.

The GCC agreement on excise tax sets a unified framework for policy and means of collecting the tax in Gulf countries.

“Bahrain is a very different market than the neighbouring countries. A lot of the firms in the kingdom are small-to-medium businesses. They are aware of the upcoming changes in taxation in Bahrain but they have not moved as fast as the large businesses,” Ali Al-Mahroos, senior tax manager at KPMG Bahrain told Zawya in a telephone interview.

“Unlike Saudi and UAE, in Bahrain we do not have any form of tax culture. This causes more [of a] burden to businesses and management along with the additional reporting and workflow required,” he said.

"The only tax law currently present in Bahrain is the income tax levied on oil and gas companies and that was approved by the former Emir a long time back” KPMG’s Al-Mahroos added.

Saudi Arabia introduced its excise tax in June this year and the kingdom’s retail and wholesale stores have reported that the sale of soft and energy drinks has since dropped significantly.

In the UAE, the tax came into effect earlier this month and has been imposed on all excisable goods consumed inside the country, including free zones, but excluded goods meant for consumption outside of the country by outbound travelers.

Bahrain had signed the GCC unified VAT and Excise Treaties in February this year and the kingdom’s Information Affairs Minister, Ali bin Mohammed Al-Romaihi announced that the value-added-tax (VAT) is expected to go into effect by the middle of 2018 at a standard 5 percent rate.

© ZAWYA 2017