The South African Revenue Service (Sars) recently confirmed that it will start collecting a new health-promotion levy, also known as the sugary beverages levy (SBL), or “sugar tax”, from April 1. The levy is designed to support the Department of Health’s aim to reduce the incidence of diabetes, obesity and related diseases.
The SBL was initially announced by the Minister of Finance in the 2016 Budget. After a public consultation process, the SBL was legislated and forms part of the Rates and Monetary Amounts and Revenue Laws Amendment Act, which was passed by Parliament on December 5 last year.
The levy will be 2.1 cents per gram of sugar content that exceeds four grams per 100 millitres. The first four grams per 100ml are therefore levy-free. Sugar content means both the intrinsic and added sugar and other sweetening matter.
Sugar content will be calculated on the sugar content as certified by a report from a testing facility accredited with the South African National Accreditation System or the International Laboratory Accreditation Co-operation. In the absence of such a report, a deemed sugar content of 20g per 100ml will be assumed.
For powder and liquid concentrates, the sugar content will be calculated on the total volume of the prepared beverage.
The next step in the roll-out of the SBL is the licensing and registration of the manufacturers and producers that will be liable to pay it over to Sars. This process started last month.
Only commercial manufacturers that produce sugary beverages with a total sugar content of more than 500kg a year have to be licensed and pay the SBL. Non-commercial producers below this threshold will be expected to register but will not be subject to the levy.
Although the intentions behind the introduction of the levy are commendable, it will be interesting to see whether its introduction will have any material effect on consumer use patterns and concomitantly on reducing the non-communicable diseases the levy is intended to tackle.
Many countries have introduced a similar tax with mixed results. We will have to wait and see whether the “sugar tax” has the intended positive effect here, or whether it will merely act as another mechanism for revenue collection.
Jerome Brink is senior associate in Cliffe Dekker Hofmeyr’s tax and exchange control practice.