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Sugar tax: bitter-sweet

The 2016 Budget has confirmed what a number of people have expected – the future introduction of a sugar tax. Government has pointed out that obesity stemming from overconsumption of sugar is a global concern, leading to greater risk of heart disease, diabetes and cancer. Research by the University of Witwatersrand found that a suggested 20% tax on sweetened sugar beverages (‘SSBs’) could possibly reduce obesity in 220 000 adults.

Fiscal interventions such as taxes are increasingly recognised as complementary tools to help influence people’s lifestyles in respect of consumption. In response hereto and also in line with what other countries such as Denmark, Finland, France, Ireland and Mexico are doing, it was proposed by Minister Gordhan in his budget speech that a tax on SSBs be introduced on 1 April 2017 to help reduce excessive sugar intake. SSBs include inter alia the following: still and carbonated soft drinks, fruit juices, sports drinks, energy drinks and vitamin waters, sweetened ice tea, lemonade, cordials and squashes.

One might compare the intended effect of this sugar tax to that of the current excise duties levied on cigarettes and alcoholic beverages i.e. to promote healthier lifestyles and physical wellness. Although a noble idea from a health perspective, it remains to be seen however whether the addition of another so-called “stealth tax” (i.e. a tax that slips under the radar of the average consumer) will have a “healthy” impact on consumers’ pockets and physical wellbeing when one compares the effect of the sin taxes.

The consumption of alcohol and cigarettes has not necessarily fallen drastically as a result of an increase in sin taxes per se. According to a report by the World Health Organisation (WHO) South Africa consumed 11.0 litres of pure alcohol in 2010, tipping them as the African country who consumes the most alcohol per capita.

Sugar tax could have the same negligible effect on consumption of goods as the excise duties have on the consumption of other “unhealthy” products. Simply put, those of us who love drinking sweetened beverages might continue to do so even though it might cost us more. So in the end, consumers might still consume a considerable amount of sugar whilst negating the “noble” intention of Government, resulting in a bitter taste for the wallet. Government however, will enjoy a sweet taste in the form of additional revenue. Should the converse apply, Government might well have a sweet-and-sour taste in its mouth with achieving an improvement in people’s health but losing out on additional revenue where the consumption of SSB’s might fall…

 Leonard Willemse, Senior Tax consultant at Mazars







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