UK/South Africa: Sugar tax on soft drinks comes into effect

UK and South Africa have both introduced a sugar tax on soft drinks last Friday while Ireland has postponed it plans by one month to May 1st, 2018.

The British Soft Drinks Industry Levy was already announced by Chancellor of the Exchequer Philip Hammond two years ago (inside.beer, 25.8.2016) and gave manufacturers enough time to reformulate their products. According to Britain’s Treasury already 50% of all companies, including Coca-Cola, Britvic and Lucozade Ribena Suntory and retailers Tesco, Asda and Morrisons have reduced the sugar content of their soft drinks to be below the levy’s sugar threshold thus reducing the sugar content in drinks last year by 45,000 tons. As a side effect of the industry’s early adjustment Britain’s Treasury expects now to raise only about half of the forecasted 520 million pounds ($733 million) in its first year, money which is intended to go to the Department for Education for funding sports programs and nutritious breakfast clubs for children.

The Irish Sugar-Sweetened Drinks Tax (SSDT) like its British counterpart burdens locally produced or imported sugar-sweetened beverages will not be applied to pure fruit and vegetable juices unless sugar is added. Dairy products, “milk substitute drinks” (made from soya, nuts, cerals or seeds), alcoholic drinks, non-alcoholic beer and wine are also exempted. A 330ml can of  Coca Cola, which contains 10.6 g of sugar per 100ml falls into the highest tax bracket for soft drinks with more than 8g per 100ml and will incur a tax of EUR 0.10 (USD 0.12) in Ireland and GBP 0.08 (=USD 0.11) in Britain.

South Africa has adopted a slightly different approach and will levy ZAR 0,021 per gram of sugar on all sweetened drinks, with the first 4g of sugar per 100ml exempt. This adds up to ZAR 0.46 (US$0,038) per 330ml can, which is about 11% on a can.

South Africa is among the top 10 countries in the consumption of sugary soft drinks in the world, and research has shown that drinking just one sugar-sweetened soft drink a day increases ones' chance of being overweight by 27% for adults and 55% for children.

Over 30 countries worldwide are taxing sugary drinks, including Mexico, which introduced the tax four years ago because it had the highest rate of obesity with more than 70% of the population being overweight or obese. A research carried out by academics in Mexico and the United States, noticed a 5.5% drop in purchases of sugary drinks in the first year after the tax was introduced followed by a 9.7% decline in the second year.

UK, South Africa and Ireland are not the only counties to pass similar taxes this year. Others include Portugal, India, Saudi Arabia and Thailand.

Countries, which are very unlikely to tax sweetened drinks in the short or medium run are Germany and the United States. Although some cities like San Francisco, Seattle and Philadelphia already introduced a levy on sweetened drinks, the country as a whole will not act in such a manner, knowing that President Donald Trump is rumoured to drink 12 cans of Diet Coke a day and is averse to regulating industries.

 

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