Tax on sugary drinks pulls in revenue

The Treasury has generated more money than it anticipated from its new tax on sugary drinks, despite moves by some manufacturers to reformulate products to reduce their sugar content. The government introduced a tax on sugarsweetened beverages on April 1, as part of its efforts to combat obesity and its related health risks under what the Treasury calls the health promotion levy.

The Treasury has generated more money than it anticipated from its tax on sugary drinks, despite moves by some manufacturers to reformulate products to reduce sugar content. The government introduced a tax on sugar-sweetened beverages on April 1, as part of its efforts to combat obesity and its related health risks.

The health promotion levy has been set at 2.1c for every gram of sugar per 100ml above a 4g threshold. In other words, the first 4g of sugar per 100ml is exempt from the levy.

The Treasury said it had collected a little more than R1bn in revenue from the sugar tax between April 1 and the end of August, slightly ahead of its projections. It had anticipated collecting R1.64bn during the entire 2018/19 fiscal year, which ends on March 31.

The Treasury’s chief director for economics and tax analysis, Christopher Axelson, said there could be several explanations for the higher-than-expected revenue. “Either the surveys we used to make the calculations underestimated the consumption of sugary beverages or producers have not reformulated as much as we thought or consumers have not decreased their consumption of sugary beverages as much as we estimated.”

The Healthy Living Alliance’s executive director, Sibongile Nkosi, said researchers at Wits University were evaluating the levy. “We are seeing a lot of reformulation and new sizes, but we are not sure if industry is absorbing the tax or putting up prices,” she said.

The Beverage Association of SA said it is too soon to gauge the effect of the levy and it plans to commission a study to determine its effects. It “has also run an education campaign to encourage healthy consumption of beverages, proper nutrition and exercise as part of a healthy lifestyle with the aim of reducing obesity and noncommunicable diseases”, said GM for corporate services Mpho Thothela.