Ireland forging ahead with sugar tax amid industry pushback

Authorities in Dublin outlined their intention to place a levy on high-sugar drinks in pre-Budget tax strategy papers last year.​​

The Irish Beverage Council (Ibec) – which staunchly opposed a sugar tax when it was first mooted - has called for Ireland’s government to delay the introduction of the planned sugar tax.

In a pre-budget submission issued this week, Ibec warned Irish businesses and consumers are facing a “perfect storm”​ of new consumer taxes and uncertain trade conditions due to the Brexit process.

The group, which represents soft drinks companies in Ireland, argued that these factors – coupled with currency exchange and the depreciation of the pound - could result in a jump in illegal cross border smuggling and the further development of trade in the so-called “gray market”​ in the country.

“With the euro in our pockets now buying more against the Sterling, Irish shoppers are increasingly heading north. The Minister for Finance must defer his plan for higher taxes on our weekly shop,"​ Ibec director Colm Jordan urged.

Ibec estimated that around 11% of sugar-sweetened drinks sales could be lost to illegal cross-border trade, amounting to €30m in sales annually.

The tax itself would only generate revenues of €40m a year, the lobbyists continued.

Ibec was critical of the government’s stance on the issue, which, it suggested, has created confusion. “In the past 34 months, the Department of Finance has changed how much they predict the tax will raise on five separate occasions. The prediction fell 53% between April and July alone. This shows there is uncertainty about how the tax will work,”​ Jordan stressed.

Dublin stands firm

Ibec said that its members have shown their commitment to addressing rising levels of obesity, with voluntary sugar reduction removing 10bn calories from the Irish diet between 2005 and 2012.

“We accept the government's sincerity in addressing the complex societal issue of obesity, and we are fully committed to playing our part,”​ Jordan insisted. "We will go further and continue this investment in innovation, reducing sugar content while increasing our no sugar and low sugar offerings."​

The Irish government was apparently unmoved by this argument, however.

A spokesperson for the Department of Finance told FoodNavigator yesterday (4 September) that the government is moving ahead with its taxation plans, which are an important plank in efforts to tackle rising obesity levels in the country.

“The Programme for a Partnership Government includes a proposal for a new tax on sugar sweetened drinks (SSD) as a public health measure. This followed the inclusion of such a tax in the general election manifestos of all four of the main political parties. An SSD tax is just one element in a suite of measures proposed to tackle Ireland’s obesity problem as part of the Department of Health’s action plan, A Healthy Weight for Ireland.”​

According to data from the DoH, only 40% of Ireland’s population currently has a “healthy” weight, while a recent study from the Imperial College London published in The Lancet found 37% of Irish women and 38% of Irish men are forecast to be obese by 2025.

The DoH proposed that the sugar-sweetened drinks tax should apply to water-based and juice-based drinks which have an added sugar content of between five and eight grams per 100ml. A second rate to encompass drinks with over eight grams added sugar content per 100ml was also proposed.

The Department of Finance spokesperson confirmed that the tax, which will be introduced in April to “coincide”​ with a similar move from the UK government, will be calculated on the basis of sugar content per litre of product.

“This tax will be imposed as a volumetric tax as a specific amount per litre of product, as opposed to an ad valorem rate imposed on the final retail price of product. This is to ensure that the tax is applied to sugar content of the product regardless of the retail price,” the spokesperson said. “A final decision on the rate of the tax will be announced in Budget 2018.”​

Question mark over UK

Despite the government’s continued public backing of the SSD tax, there could be a spanner in the works in the form of UK policy, an industry insider who requested to remain anonymous suggested.

The Irish government decided to introduce the sugar tax at the same time as its counterparts in London in order to reduce issues around cross-border trade and to maintain parity between pricing in the Republic of Ireland and Northern Ireland.

As Ibec noted, pricing equivalence has already been placed under pressure by the depreciation of the sterling against the euro in the wake of Brexit. Any change in policy direction on the UK’s part could push prices north and south of the border further apart still.

“One reason offered by the government for delaying the implementation of the Irish levy until 2018 was to bring its introduction in line with similar measures being introduced in the UK. It may be that the introduction of the UK levy could be delayed owing to factors associated with Brexit. This could lead to the Irish levy also being delayed,”​ the source suggested.