Bitter taste to sugar tax’s easy money
THE Sunday Tribune recently reported as many as 350 000 jobs are at stake in industries reliant on sugar. Coca-cola SA said it might need to shed up to 1 000 employees and, to some extent, the sugar tax instituted in April last year has been fingered as the culprit.
Taxes are not helpful. It is time to come to terms with that reality. We cannot tax ourselves into prosperity.
South Africa needs economic freedom and a government that respects freedom of choice.
The Free Market Foundation noted in 2017 that, for a change, trade unions and the foundation were of one mind about something: that the sugar tax posed a threat to the employment of thousands.
When organised labour and the free market lobby both disagree with a policy one would expect the government to reconsider, but it pressed on.
In September 2016, foundation researcher Chris Hattingh wrote that as a result of the tax the soft drinks industry’s contribution to South Africa’s gross value added could decrease from R60 billion to R47bn and 42000 jobs could be lost. Today we are seeing the first signs of the accuracy of that prediction.
An acquaintance who advises enterprises on labour affairs confirmed as much. A bottling company that does work for Coca-cola is laying off several dozen employees because of reduced business in the wake of the sugar tax.
The sugar tax idea, championed by Health Minister Aaron Motsoaledi, simply increases the cost of living for consumers, especially the poor, and places undue strain on employers, leading to job losses.
More importantly, the sugar tax violates the personal freedom of South Africans.
When the tax was implemented the brands associated with Coca-cola reduced the size of offerings from 330ml to 300ml with no real reduction in price.
Taxing sugar and other so-called “sinful products” is all about the government’s unhealthy appetite for raising revenue by any means possible, controlling ordinary people’s lives and maintaining its prestige among large global non-governmental organisations.
The World Health Organisation, an unelected and unaccountable international entity, is largely to blame for planting this disastrous idea in the minds of the South African government.
In its 2013 Global Action Plan, WHO encouraged member states to implement taxes that “discourage the consumption of less healthy” food products.
In response, the Department of Health adopted obesity control strategies that identified a tax on sugar as an effective measure to inhibit the free choice of South African consumers.
Economist Luke Muller noted that a “sugar tax is also regressive”, since “food and beverages make up a relatively larger proportion of expenditure in poor than in rich households”.
In simple terms, a poor person who earns only R3 500 a month pays more relative to their income in sugar taxes on a can of Coke than does someone who earns R20 000 a month.
In other words, not only is the sugar tax economically ill-considered, but it is also blatant elitist discrimination against the poor, who are being effectively prohibited from having a sweet tooth.
The Canegrowers’ Association has called on the government to take remedial action.
While it is commendable that they have the courage to point out that the sugar tax is a big cause of the impending job losses – it is rare for civil society to attack government “feel-good” measures – their recommendation that the government should impose protectionist trade measures is ill-considered. Rather get rid of the sugar tax than place extra burdens on the economy.
It goes without saying that a sugar tax, if not inconsistent with the written text of the Constitution, falls foul of the spirit and purpose of the Constitution to advance freedom, dignity, and equality.
As such, the tax should be scrapped without a replacement. Let ordinary consumers decide for themselves what their sugar intake will be.
Schadenfreude is experienced when one derives pleasure from the misfortune of others. It would be a textbook example of schadenfreude for those of us who have been warning government that the sugar tax will lead to job losses and economic ruin if the circumstances were not so tragic.
We derive no pleasure from seeing thousands of workers joining the ranks of the unemployed. We only hope the government takes this as a lesson for the future: taxes do not solve problems; they create and worsen them. The Constitution and the Rule of Law (2019).