Sugar tax in effect on April Fool’s Day

APRIL: R1.39 PER LITRE OF SUGARY SODA TO BE ADDED TO EXISTING PRICE

The sugary drinks tax becomes effective on April 1 and more ‘health promotion measures’ may follow.

Mexico has shown decrease in consumption of sugary beverages since taxation.

The “health promotion tax” – a sugary drinks tax – becomes effective on April 1 and it seems more “health promotion measures” may follow. The budget stated that a policy brief on the use of taxes to encourage “healthy choices” will be published shortly.

Cliffe Dekker Hofmeyr’s Jerome Brink says, to his knowledge, studies are inconclusive on the relationship between sugar tax and reducing non-communicable diseases like diabetes.

“That said, one country which is often mentioned is Mexico, which has shown a decrease in the consumption of sugary beverages since the introduction of the tax.”

The final rate is fixed at 2.1 cents per gram of sugar content that exceeds 4 grams per 100ml. This equates to approximately R1.39 per litre of sugary soda to be added to the existing price.

The SA Heart and Stroke Foundation had previously expressed its support for the tax. The foundation’s Gabriel Eksteen, nonetheless, warned that sugar isn’t the only cause of obesity.

“In addition to our efforts in educating consumers, we need the food industry to provide healthier food options. Despite being aware of the health risks associated with high sugar consumption, many food producers continue to saturate the market with cheap sugar-laden products,” he noted in an earlier interview.

He said tackling obesity needs a comprehensive approach that addresses food accessibility and affordability; education and marketing guidelines; and safe, accessible places to exercise.

Some studies have indicated that consumers substitute sugary drinks for other sweet foods. But, Brink says it may be premature to predict one way or another. “One should always appreciate that every country is different with various socio-economic factors influencing consumer patterns. Tax is just one of the factors.”

He says several countries have implemented the tax or levy on a slightly different basis. “While some of the studies have suggested that one requires a tax rate of 20% to effect any impact on consumption patterns, Mexico introduced an effective rate of tax of 10% which nevertheless saw positive effects.”

Brink expects the tax cost to be passed on to consumers. This would be beneficial from a profit perspective and in line with the intention behind the tax.

But Keith Engel of the SA Institute of Tax Professionals disagrees. “The costs will be shared. Companies are also repackaging their products in response. At the end of the day, the real question is the negative symbolic value that this tax will have on the market, being that sugar is now being treated as a rough equivalent to cigarettes and alcohol.”

He says the tax will most likely have a more negative impact for the poor, as would any other price increase on food. Engel expects more sin taxes on other products to follow.

Brink adds that soda drinks with their usual sugary content will probably still be available. Many producers will likely innovate, be proactive and react to market changes accordingly.

Food industry must provide healthier options