Sweetening the tax pot

The so-called sugar tax – which argues for a 20% levy on sugar-sweetened beverages (SSBs) – has been touted as a solution for reducing obesity in our country.

According to a recent study conducted by Wits and presented to Treasury, data supporting the new taxation are generated from surveys conducted locally and in Mexico and France.

Fortunately (or not, depending on which side of the fence you find yourself), reports have been criticised as being inaccurate, triggering a call from Minister Pravin Gordhan for an impact assessment of the proposed 20% increase tax burden on consumers of the sweet, fizzy stuff. Treasury and economists are expected to unpack the results of this report during November and decide "yay or nay" on the implementation in 2017 of this proposed sugar tax.

Of course, the beverage industry is up in arms, clambering, "Why not sweets and chocolates? ‘Why not fats and oils!" Coca Cola has argued that sugar consumption over the last 15 years has declined by 13% while consumption of meats and oils have seen a startling escalation of 150%. A spokesperson for Coke says that the company will be forced to close a number of its plants should the levy on sugar sweetened beverages proceed. Likewise, Beverage SA claims that implementing the Act will result in 60,000 job losses and a decrease in GDP.

Businesses need to look at adapting their products to include less sugar, and not necessarily levying a tax on sugar sweetened beverages, but to raise educational campaigns in conjunction with the levy or no levy whatsoever.

Pro-taxers are claiming that the proposed tax will most definitely combat obesity, reduce our country’s tax deficit and raise much needed government funds, with reports saying that such measures could save up to R10bn in medical care costs for people suffering from obesity.

So the big question is this: Has this worked anywhere else in the world? The answer is rather vague. Denmark, France and Mexico are the only countries, which have imposed sugar tax: Denmark's levy dates as far back as 1930, but was recently abolished, while France and Mexico introduced a tax in 2012 and 2013, respectively. In a recent study conducted in Mexico showed a 6% drop in sugary drinks was achieved in 2014 with an estimated revenue at 10% at 15,4-16bn pesos (about R10bn).

It has been estimated that reduction in sugary drink consumption will decrease the number of people who are obese by 1%. Pretty impressive. This certainly bodes well for the pro-tax camp. But on the other hand, Denmark excised a tax on saturated fats in 2011 which led to inflation, cross-border shopping, job losses and huge administrative costs; thus, the "fat tax" was abolished a mere 15 months after its implementation.

The debate in South Africa rages on. Consumers will soon know their fate as the study is released and the Treasury and sugar and tax experts vote.