Sugar tax will push up the price of fizzy drinks
Tiny increase in sugar tax
Finance Minister Tito Mboweni has announced a marginal increase in the tax on sugary drinks during his Budget speech, mainly to “avoid an erosion in the value of the tax due to inflation”.
The tax will increase from 2,1 cents to 2,21 cents per gram of sugar per 100ml, with the first 4grams of sugar still exempted from taxation.
The tax – known as the Health Promotion Levy (HPL) – came into effect on 1 April 2018 and this increase will be implemented on its first anniversary.
In the past few days, the SA Cane Growers’ Association and Coca-Cola had asked Mboweni to shelve the levy, claiming that they had both suffered financial losses as a result and warned this might lead to retrenchments. The sugar industry has been in trouble for a while, and its problems are largely unrelated to the levy
However, Treasury Deputy Director-General Ismail Momoniat ruled out shelving the levy, saying it had recently been introduced and its impact on both obesity and business had not yet been assessed.
By the end of December, the levy had already raised “R2.3billion, of which R37 million was from import duties and the rest was raised domestically”, according toTreasury.
Initially, Treasury proposed a tax of around 20 percent on a can of Coca Cola but reduced this to 11%.
South Africans are among the top 10 consumers of sugary drinks in the world, and research has shown that drinking just one sugary fizzy drink a day increases the chance of being overweight by 27% for adults and 55% for children. Diabetes alone claimed more than 25 000 lives in 2015, and public health facilities reported seeing 10 000 new diabetes cases every month last year.
Treasury and academics are still currently researching the impact of the levy on both on industry and the consumption of sugary drinks in order to project whether the levy will impact on reducing obesity, and associated diseases of diabetes, strokes and heart attacks.
Wits University School of Public Health’s Professor Karen Hofman welcomed the levy’s increase, saying she was “delighted to see that the South African government cares about its people”.
“The increase is obviously inflationary, and still way below what evidence shows will make a significant impact on obesity. The impact assessment is still ongoing, and a lot of work still needs to take place to get a true picture of what is actually happening,” said Hofman, who heads, Priceless, a unit that assists government to develop cost-effective health policies.
Over 30 countries worldwide are taxing sugary drinks, and the UK, Portugal, India, Saudi Arabia and Thailand have passed a similar tax in the past year.