When the UAE’s Federal Tax Authority announced a new tiered excise tax on sugary drinks starting in 2026, it marked another step in the country’s broader public health strategy.

With nearly one in five adults in the UAE living with diabetes and one in three classified as obese, the initiative comes as part of wider efforts to promote healthier lifestyles, while raising awareness about the impact of excessive sugar consumption.

The tax applies to beverages with more than 5 grams of sugar per 100 milliliters, and builds on existing excise taxes first introduced in 2017.

But how much influence pricing measures can have on everyday consumer choices in a market where sweetened drinks remain popular?

A FISCAL POLICY WITH A PUBLIC HEALTH MISSION

“Diabetes affects nearly one in five adults, while nearly one in three adults and one in six children suffer from obesity, among the highest rates globally. Furthermore, NCDs cost the UAE an estimated $10.8 billion in 2019 in healthcare spend and economic losses (approximately 2.7% of GDP),” says Oussama Nicolas, Senior Managing Director and Head of Healthcare Middle East at FTI Consulting.

He adds: “Health and economic gains are amplified when new tax revenues are reinvested into public health programs.”

This taxation reform, while generating revenue, is a long-term investment in national health and economic resilience. Nicolas explains that evidence from other countries supports this approach. “Similar reforms abroad show that F&B companies respond through product reformulation, new product development/acquisition, and renewed marketing efforts. Furthermore, World Bank analysis highlights that reduced demand for sugar-sweetened beverages (SSBs) is largely offset by increased demand for substitute drinks and bottled water, often produced by the same companies.”

While discouraging sugar, it aims to reward companies that innovate and align with public health priorities.

THE BEHAVIORAL EXPERIMENT

Early evidence suggests that such policies can indeed influence behavior. Naishadh Soneta, Managing Director, Tax Middle East at FTI Consulting, has observed this shift firsthand. “While shift in consumer behavior is a function of many factors, there has been a noticeable shift in consumer behavior that coincides with the introduction of excise tax in the UAE and a further expected increase in excise tax should nudge consumers toward low- or zero-sugar alternatives.”

In the UAE, where health consciousness is on the rise, Soneta says a tiered volumetric tax could accelerate this shift, particularly as consumers become more mindful of both wellness and value.”

However, the measure must be supported by sustained enforcement and public education to maintain its impact. “The key will be sustained enforcement, public education, and calibration as the market and user behaviour evolves,” adds Soneta.

From the healthcare front, Dr. Jimmy Joseph, Specialist in Internal Medicine at Aster Speciality Clinic, agrees that price signals can shape choices. “Evidence from several countries suggests that taxation on SSBs can meaningfully reduce consumption, particularly among younger consumers and low- to middle-income groups who are more price-sensitive.”

Dr. Joseph says that in some Western markets, a 10 percent soda tax reduced sales of sugary drinks   by nearly 12 percent within two years, while sales of bottled water   increased. “In the UAE, price alone may not be a magic bullet, but it acts as a powerful behavioral nudge,” he says. “When people notice that a regular soda costs more than its zero-sugar alternative, they begin making small substitutions. Over time, these small shifts accumulate into a large public health impact.”

REFORMULATING THE BUSINESS MODEL

The policy is also prompting companies to rethink how they position and market their products. Soneta calls it “pricing health into everyday goods,” which encourages the private sector to adapt. “Brands will shift pricing and marketing toward low/zero-sugar lines; retailers will make healthier options easier to spot; employers and venues will tighten procurement standards; insurers may offer rewards for healthier lifestyle choices.”

This ripple effect could integrate preventive health into everyday commerce, making better choices more visible and accessible.

For beverage makers, the shift has already begun. Bandar Okrin, founder and CEO of Saudi-based beverage company Kinza, says his company has anticipated this. “We have already introduced sugar-free products and are actively expanding our range of low- and zero-sugar options. With the new sugar tax taking effect soon, we see many companies moving in the same direction.”

Rather than viewing the policy as a setback, Okrin sees it as an opportunity. 

“It drives innovation, aligns with global health trends, and helps regional brands like Kinza increase growth and strengthen their market share globally.”

He believes this shift will “ultimately increase overall consumption rather than reduce it, as consumers will have more variety and healthier options to choose from.”

EVERY SIP MATTERS

Sugar is the primary contributor to lifestyle diseases like diabetes and obesity, according to clinical observations. Dr. Joseph says, “Sugar, especially when consumed in liquid form, is still a major and underestimated driver of metabolic disease in this region.”

He points out that a single 330 millilitre can of soda contains approximately 35 to 40 grams of sugar, which equals 9 to 10 teaspoons. 

This amount alone exceeds the World Health Organization’s recommended daily limit of 25 grams for free sugar, meaning many people surpass the threshold with just one drink.

Sugary beverages, he explains, contain calories without creating a sense of satiety, spike blood sugar levels, and promote fat storage. Over time, these effects contribute to insulin resistance, type 2 diabetes, and fatty liver disease, all of which are rising in the UAE.

Awareness, however, is improving. 

“We now see far more patients reading labels, using calorie-tracking apps, and asking about glycemic index or artificial sweeteners. Campaigns led by the Ministry of Health, Dubai Municipality, and local clinics have contributed to this shift,” Dr. Joseph says. 

A generational shift is emerging in the UAE, with teenagers and young adults increasingly opting for healthier alternatives, such as sparkling water, smoothies without added sugar, and unsweetened iced coffee. This trend indicates a growing awareness and preference for lower-sugar lifestyles among the youth.

POLICY MEETS PREVENTION

Experts agree that translating a fiscal measure into tangible health outcomes will require cross-sector collaboration. Nicolas believes the impact will be greater if the tax is combined with public awareness campaigns and policies that make healthier options more affordable. 

“Efforts should focus on combining public awareness with the tax to maximize behavior change, aligning broader policies and incentives with prevention goals, producing a robust local evidence base, and safeguarding equity by improving access to affordable, healthier substitutes.”

Critics warn that such taxes may disproportionately impact lower-income consumers. Advocates argue that reinvesting tax revenues in public health programs can mitigate this effect and promote social equity.

A REGIONAL RIPPLE

The UAE is taking the lead, but the ripple is already being felt across the GCC. Saudi Arabia, which also introduced an excise tax on sugary drinks in October, may adopt a similar tiered model to encourage reformulation of these products. Bahrain and Qatar are reviewing comparable frameworks as part of broader wellness and fiscal reforms.

Soneta says, “If effectively implemented, it can serve as a blueprint where fiscal measures, healthcare goals, and private sector innovation align.”