Okaz/Saudi Gazette RIYADH — More than 60 percent of restaurants across the Kingdom are facing the potential threat of shutting down in the event a draft regulation to impose 100 percent tax on food and beverages in outlets that serve tobacco products is implemented, according to investors. Speaking to Okaz/Saudi Gazette, they said that non-smoking customers will be the worst victims of this move. According to sources, the Ministry of Municipal and Rural Affairs has issued a draft mechanism for disclosing and collecting fees from outlets that sell tobacco products. Under the new move, all the restaurants and cafes that serve tobacco products need to pay 100 percent tax for the products sold by them. All customers of such food outlets will have to pay this tax irrespective of whether they use tobacco products or not. A customer who goes to a restaurant, which is serving tobacco products, needs to pay 100 percent tax plus five percent value added tax for the total amount in the invoice. The investors say that this move would result in the outlets losing a huge number of customers. Moreover, this will also lead to loss of jobs of Saudi men and women at these eateries. According to the draft mechanism, all shops and food outlets offering tobacco products must disclose the total value of their monthly sales at the end of every Gregorian month with attachment of detailed statement along with sales invoices. These shops and outlets have to pay the tax before 15th of every month. All the shops have to show the value of the tax in a separate column in each invoice issued. They must clearly show this in the price list also. Naif Al-Sayegh, an investor, said that it is inconceivable and unreasonable to impose on a consumer, who does not consume any tobacco item, to pay a bill of SR400 for the value of food consumed by him, amounting to SR200. This will deal a severe blow to both the investors and customers. This will also aggravate the unemployment problem among Saudis, he said. The investors say that the draft mechanism would produce severe impact on food outlet investors, incurring huge losses and subsequently leading to closure of their outlets. They suggested that the decision shall be limited to a tax on shisha and other tobacco products only with exclusion of food items and beverages. The investors pointed out that some investors spend around SR9 million to open food outlets and they are facing a potential threat of shutting down within six months, in the event of this draft mechanism being implemented, due to high cost of operation, high cost of raw materials, high energy expenses such as electricity and gas in addition to labor costs coupled with weak purchasing power and lower sales.
