Business The Budget

Thursday 28 August 2014

Sugar tax on soft drinks on the way in next month's Budget

Published 13/11/2012 | 05:00

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These drinks are already subject to a 23pc VAT rate, and the new tax is expected to be in the form of a 10pc hike in excise duty.

SOFT drinks could be hit with a Budget "sugar tax" – to raise revenue and curb obesity.

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A confidential report commissioned by Health Minister James Reilly recommends increasing the excise duty on fizzy drinks, the Irish Independent has learned.

These drinks are already subject to a 23pc VAT rate, and the new tax is expected to be in the form of a 10pc hike in excise duty.

It means soft drink prices could rise by up to 20c a bottle.

The report, which will be presented to the Department of Health's obesity committee today, should give Dr Reilly the evidence he needs to ask

Finance Minister Michael Noonan to impose the increase in next month’s Budget.

It would push up the retail price of soft drinks, with consumers paying a third on top of the pre-tax price.

For example, a bottle of lemonade which would cost €2 without tax is already subject to VAT at 23pc, pushing up the price to €2.46.

A further 10pc in sugar tax would add another 20c to the cost at the till, meaning shoppers would end up paying €2.66 for the same bottle.

However, the report stops short of seeking the introduction of the "fat tax" that has been introduced in some other European countries.

The report, prepared by the Institute of Public Health in Ireland, was commissioned by Dr Reilly after similar plans to introduce the measure last year fell through.

The Department of Health's special action group on obesity will decide on whether to recommend the price increase. The report is understood to say that "on balance" it should go ahead.

Education

Fizzy drinks are linked to weight gain, but the evidence is not so strong when it comes to the association between higher tax and lower consumption.

A tax increase might not work, and people may continue to buy the large cheap bottles of sugary drinks regardless, the report warns.

However, it acknowledges that higher tax coupled with better education could help alleviate the obesity crisis.

The biggest impact would be on the young and lower income groups who are the biggest consumers of soft drinks.

The need for drastic measures is underlined by figures showing 60pc of the adult Irish population and almost a quarter of seven-year-olds are either overweight or obese.

France has led the way with a sugar tax, and has applied higher rates to drinks and fruit juices with added sugar.

But Denmark is to scrap the fat tax it introduced a little over a year ago – a world first.

The Danish government said it was costly and failed to change people's eating habits.

The Danish Tax Ministry said in a statement: "The fat tax and the extension of the chocolate tax – the so-called sugar tax – has been criticised for increasing prices for the public, increasing companies' administrative costs and putting Danish jobs at risk.

"At the same time it is believed that the fat tax has, to a lesser extent, contributed to Danes travelling across the border to make purchases.

"Against this background, the government and the (far-left) Red Green Party have agreed to abolish the fat tax and cancel the planned sugar tax."

A sugar tax here would trigger a backlash from the drinks industry and employers' group IBEC, which represents the food and beverage sector.

IBEC, fearing job losses, has warned against any such tax in its pre-Budget submission.

Benefits

It said: "Imposing a discriminatory tax on certain food and drink products would have no health benefits and would only serve to further hit already hard-pressed consumers."

IBEC's submission says it would be better to work on the reformulation of beverages, consumer awareness, the promotion of physical activity and workplace and school well-being programmes.

Irish Independent

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