The GCC region and Kuwait have seen an interest increase in taxation in recent years. According to present data, worldwide taxes on sugar-sweetened beverages (SSB) are rising to lower product sugar content and sugar consumption (Alsukait, 2019). The GCC Council agreement in 2015 ratified legislation enacting a 100% tax on cigarettes and energy drinks and a 50% excise tax on SSBs (Alsukait, 2019). The council’s goal is to restrict the use of substances that promote obesity. Several studies have linked SSB, energy drinks, and cigarettes as the primary causes of numerous health problems, including diabetes, cardiovascular issues, obesity, and other ailments (Techakihajik, 2019). SSB Tax is attracting attention on a global scale as a means of attempting to lessen the incidence of obesity and other health-related issues. The GCC countries are all rich in oil and have depended on the income brought in by the high price of oil.
The GCC explores innovative and varied taxation methods to generate additional revenue points. Saudi Arabia introduced the SSB tax in June 2017, the United Arab Emirates in October of the same year, and the VAT tax shortly after (Liu, 2019). Being the last member in the GCC to implement the tax, Kuwait has faced numerous problems due to individuals beginning to smuggle goods out of Kuwait and profit from the lower costs. As a result, the surrounding countries have pressured Kuwait to apply the tax. The tobacco sector in Kuwait has likewise raised prices, making unauthorized profits without paying taxes (Monshy, 2020). The research contributes to stakeholders’ perspectives on the tax relation. It will be beneficial to investigate the stakeholders’ perceptions of the motivation behind the tax application. It will indicate stakeholders’ knowledge of why the government levies the tax since this information will eventually influence their conduct.
After studying the tax-related literature, the researcher discovered that there are no studies on the relationship between the SSB tax and how it impacts the GCC sector in general and Kuwait in particular. People are unaware of this kind of tax benefit because the new law has not yet been approved. Despite the tax imposed in every GCC nation, very little research has been done to demonstrate the impacts and results from the stakeholders’ viewpoint. The study tries to close this gap and ascertain if the market is prepared for such regulations. In order to guarantee compliance and make the tax calculation procedure simple, it will also identify the government’s communication methods and systems.
Literature Review
The countries are implementing SSB taxes to combat the global obesity crisis and promote a healthy lifestyle. The high sugar content of SSBs has been associated with adverse health effects when consumed in large quantities (Ambrosini et al., 2013). One of the numerous elements influencing the application of taxes is the amount of SSB consumption in a nation. The primary goal of the SSB tax is to decrease calorie intake, which will aid in lowering a person’s BMI. The SSB tax would then result in a decrease in obesity and other weight-related problems. As a result, the quantity of SSB consumption is thought to be a key factor in determining how the tax will be implemented and how much impact it will have (Doherty, 2021). These policies directly impact the households and the family members of these households who consume a lot of SSB.
Two taxation options are available: charging a percentage directly to the SSB price or taxing per ounce. The optimal tax method, according to experts, is the % per ounce (Welsh, 2017). The government must have specific policy goals and choose the appropriate taxing categories to assure the tax’s viability and efficacy.
Applying the tax per ounce in the USA is the suggested taxation technique. The government will refrain from bulk purchases and price reductions, in contrast to taxing against the price. The government will boost the tax’s efficacy in addressing obesity in this way (Techakihajik, 2019). Denmark’s per-kilo sugar tax would have brought in DKK 1 billion yearly (Blaufus, 2017). Mexico enacted a tax in 2013 of 1 peso per liter, or around a 10% price rise. As a result, SSB consumption fell 10% in a year (Bruning, 2020). Similar research has been done in Canada on implementing 5 cents per liter. Experts predict that the tax will bring in $6.5 billion yearly for Canada; if they assume a 10% reduction, they predict the tax will bring in $5.85 billion annually. Essentially, a portion of the funds will be utilized to promote wellness and fight obesity (Welsh, 2017). According to the studies, SSBs play a substantial role in obesity, heart disease, and cancer; hence increasing taxes may make people less likely to consume them.
Methods
Recruitment and Sample
In the current study, the sample was selected, and the data were collected using purposeful convenient sampling. It investigated which industrial and governmental companies in Kuwait produce carbonated soft drinks. Participants in the study came from various departments, and the market leader was the focus of the research. The executives of each department who were being interviewed were the candidates. Eight from the industrial sector and five from the government were among the thirteen questioned people. After a few interviews, a pattern emerged in their responses that eventually reached a saturation point.
Instrument Development
The qualitative approach to research has been adapted to use the inductive research method, which allows the researcher to undertake an in-depth analysis to investigate participants’ thoughts and opinions on the taxation of SSBs. The interview questions were adapted from Alsukait’s study, and semi-structured interviews were used. The questions were modified to meet the Kuwaiti industrial environment because Kuwait is a GCC member, and the excise tax was not imposed (Alsukait, 2019). The three discussion areas were the origin of the tax, operationalization of the tax, and barriers and facilitators in tax implementation. The questions were written in both Arabic and English to interview all the department heads who speak only Arabic or English. It was crucial to obtain the study participants’ informed consent. Giving participants information about the study and giving them the option to accept or reject participation is the primary goal of informed consent.
Data Collection Procedures
Thirteen audio-recorded interviews with the applicants, lasting from 15 to 45 minutes, were used to collect the data. The research participants were reminded of their right to confidentiality and that they might end the interview at any time. They were also notified that the interview was being videotaped and that it was being done for the study. The recordings were kept in a protected file and only used to examine the data. Due to the many departments and positions the participants work in, the study questions underwent modest alterations. Due to Kuwait’s lack of tax implementation, the questions also addressed expectations for the future.
Analytical Methods
Depending on the participant’s native language, the interviews were conducted in English or Arabic and audio-recorded in person. The researcher translated the Arabic interviews into English for the purpose of analysis via the thematic approach. The Ortega-five-stage Avila’s theme analysis approach was employed (Avila, 2018). The first stage was data familiarization by reading the interviews several times, making notes each time, and comparing them to the data from the other participants. The second stage involves coding the data to make it simpler and easier to compare. All interviews were read and coded using the initial framework in the third step, which involved creating a working analytical framework to add new themes. The codes were then added to the themes and examined in the fourth step of indexing. The data was then organized into charts that were categorized following the themes and coding framework during the fifth and final stage, charting. The researcher then determined the industry’s level of understanding and familiarity with the three themes mentioned in the earlier stage by reducing and analyzing the data.
Results
According to the respondents’ profiles, 62% of participants were from the industry, and 38% were from the government. The eight themes were discovered using transcript analysis, as shown in Table 1. The topics are covered separately by officials from the government and then industry officials.
Table 1. Factors affecting the taxation of SSBS in Kuwait
Lack of Taxation Policies
The industry representatives were questioned on how they felt about the taxation of SSBs in Kuwait. All eight respondents stated that Kuwait lacks regulations for implementing the tax based on their personal experiences. One respondent stated:
“Well, Oman and Qatar recently applied the tax, and I believe Kuwait will follow. From what I see during my time in Kuwait is that it has a parliament that has to pass the law. The people’s voice is heard as well and has an effect. I believe the tax will be implemented; it is just a matter of time. However, I believe the government is not ready and needs more education on the tax to implement it flawlessly.”
GCC Regional Policies
The industry officials were asked how they felt about the GCC regional policies. Six of the eight respondents emphasized the importance of GCC regional policies for the implementation of the tax in Kuwait based on their observations. The government and ministries, according to the participants, are active in learning more about the tax by considering the other nations to create the solid system necessary for tax functioning.
Stakeholder Consultation
According to the eight respondents’ experiences, stakeholder discussions are crucial to the effective implementation of taxes in Kuwait. The government and business representatives emphasized that the finance minister is a critical figure in putting the tax into effect. As one of the participants asserted:
“The governments of the GCC council, of course, and the ministries of finance. I do not think the Health Ministry’s had any say or recommendations on this matter. And to answer the second part of the question, I would not say there was pushback, but we are requesting meetings which have not happened to discuss and agree on a system that can be easily used by both involved.”
Beverage Industry
According to the eight respondents’ experiences, the beverage sector has affected the introduction and execution of the tax. One of the theories for tax adoption in Kuwait and other nations is the increased use of sugary beverages. One of the participants stressed the following:
“What I feel is that most of it in Kuwait usually there is no taxation other than indirect tax, mostly that is no type of taxation so, most the government would have thought about bringing in some extra revenue. Other than that, all over the world, it has become an issue of sugary drinks and the type of drinks that affects health. People are trying to restrict those types of things.”
Public Attitude
All eight respondents acknowledged that public opinion might be one of the variables influencing Kuwait’s application of taxes. Officials from the sector contend that because the public is not accustomed to paying taxes, they will not be noticed. According to one of the participants:
“Most reactions were unpleasing and rejection from the public mainly as they believe that these taxes are a start of many more to come. And I am sure that this is the start as the government needs to find a new source of income.”
Tax Motivation
According to the eight respondents’ experiences, the establishment and execution of taxes have been influenced by the motive behind them. The adoption of the tax was motivated in large part by reasons relating to income and health. One of the respondents stated:
“If we take the reason from the Tax Authority, they claim that it is health-related, and I believe they mean well; however, to be a health-related tax, it should include all the unhealthy products. And since not all are included in the tax, all that are taxed believe it is just to have more income for the government.”
Tax Strategies
Based on the eight respondents’ perspectives, the introduction and execution of taxes have been influenced by tax strategies. Since Kuwait has never had a tax system, its abrupt implementation will affect business income and profitability. Businesses require various ways to sustain that in order to continue making progress. According to one of the participants:
“For the first part of the question, uh, examples of the data that we got from, uh, other countries where volume percentage on the volume affected from the tax itself. For example, the volume was 1000 before the taxation, and it became 400 after the taxation. So, the effect of the 60% was reflected to us to study the major effect of, uh, taxation itself. Also, the best practices were given to us from other countries as well.”
Health Consequences
The industry representatives were questioned on how they felt about taxes on sweet beverages and their connection to health. According to the eight respondents’ experiences, the tax introduction and execution have been influenced by the health consequences. Industry representatives claimed that Kuwait has a high rate of obesity and diabetes, which is why this tax is being enforced. Health effects still play a significant part in tax implementation, even though it is at the surface level, and the primary purpose is to earn income.
Discussion
The data were analyzed using a thematic approach and qualitative analysis to examine the data from the perspective of the industry’s taxes. This study has limitations because it is qualitative and relies on people’s views rather than numerical facts. The research also only represents the perspectives of the government and business, leaving out those of other significant players like the Ministry of Finance and the general public. There is no clear vision or structure in place to move forward with the implementation of the tax because it has not yet been implemented. It is unclear when the tax will go into effect and when a functioning tax administration will be ready.
Future study to validate the data obtained from the industry, similar to the current research, is advised from the health organizations and the Ministry of Finance standpoint. It is also suggested to conduct a quantitative study utilizing a survey to determine what the general public thinks about the tax. The study identified a deficit in the literature about SSB’s subject and how it will affect Kuwaiti business, politics, and health organizations. Since taxes are new to the area, implementing them similarly to the other GCC nations might significantly impact Kuwait’s industry.
According to the results, the researcher strongly suggests more investigation into tax methods. Since there are several approaches, the research will help distinguish between a tax on value and a tax imposed per ounce and which is the more efficient strategy. After the tax is implemented, research comparable to the current research might be conducted to examine the methodologies employed and determine whether a new approach might be suggested. A comparison of the Value Tax and the Tax per Ounce might be made to see which is more beneficial in enhancing general health and reducing consumption of dangerous goods. The final recommendation is to offer additional possibilities for a better system by using various tax strategies that generate more revenue for the government.
Policy Implications
Since taxes are new in Kuwait, the Excise Tax first looks to be the ideal option for a health-related tax. If the tax structure is adequately researched and put into practice, it can successfully minimize health hazards from unhealthy foods and beverages and serve as a new source of income. To get the stakeholders’ support, the government must be explicit about how the tax will be implemented. If the tax aims to promote health, then all sugary snacks and unhealthy meals and drinks should be taxed.
The government should research all available taxation possibilities. If the primary objective is to raise money, a study should be done to determine how much would be generated if there were an income tax or a tax on money transfers. If health concerns are the primary factor, expanding the selection of harmful foods and beverages may encourage less consumption and reduce obesity. The Ministry of Finance must act quickly to staff the Tax Administration with knowledgeable individuals who have received training in tax concepts and procedures. The government and the industry should have meetings to decide on the optimal Tax design to be implemented because the tax is new to the area.
If stakeholders involved are not prepared, the tax should not be applied; the tax should be enacted for a specific reason. The first phase is tax administration; industry meetings should be held when appropriate individuals are hired. An implementation schedule should be discussed during the meeting. A six-month trial will estimate the income earned and the necessary modifications for a reliable system without actually taxing the goods. Set a deadline for actual implementation agreed upon by all parties, and include specific articles of penalties to guarantee compliance.
Reference List
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Ambrosini, G. L., Oddy, W.H., Huang, R.C., Mori, T.A., Beilin, L. J. and Jebb, S. A. (2013) ‘Prospective associations between sugar-sweetened beverage intakes and cardiometabolic risk factors in adolescents’, The American Journal of Clinical Nutrition, 98(2), pp. 327-334.
Avila, O. (2018) ‘Exploring Perceptions of the Mexican sugar-sweetened beverage tax among adolescents in north-west Mexico: A qualitative study’, Pub Med, 9(3), 12-90.
Blaufus, K. (2017) ‘Tax misperception and its effects on decision making – Literature review and behavioral taxpayer response model’, European Accounting Review, 7(2), pp. 225-270.
Bruning, M. (2020) ‘Associations between sugar-sweetened beverage consumption and fast food restaurant frequency among adolescents and their friends’, PMED, 46(4), pp. 277-285.
Liu, C. (2019) ‘Corruption and tax structure in American States’, Journal of Indexing and Metrix, 9(6), pp. 223-229.
Monshy, S. (2020) ‘Implementation of tobacco control measures in the Gulf Cooperation Council countries, 2008–2020’, Substance Abuse Treatment, Prevention, and Policy, 16(57), pp. 2226-2229.
Techakihajik, J. (2019) ‘International application of sugar-sweetened beverage (SSB) taxation in obesity reduction: Factors that may influence policy effectiveness in country-specific contexts’, Health Policy, 8(7), pp. 2250-2269.
Welsh, J. (2017) ‘The sugar-sweetened beverage wars: Public health and the role of the beverage industry’, Curr Opin Endocrinol Diabetes Obes, 20(5), pp. 401-406.