The levy will have two bands: one for total sugar content above 5g per 100 ml; and a second band for drinks with more than 8g per 100 ml.
Based on the government’s revenue targets, the levy will be around 18 pence ($0.26) or 24 pence ($0.34) per litre unit (for each band respectively). For a standard 330ml sized can, this would equate to 6p ($0.09) or 8p ($0.12).
For Niamh Michail of FoodNavigator, the key question is whether the tax will encourage companies to reformulate.
“The government seems to think it will,” she says. “The Chancellor of the Exchequer said in his speech to Parliament the tax would come into effect in two years, in order to give companies plenty of time to reformulate.
“But the government has also said smaller companies will be exempt from the levy, meaning no incentive for them to cut sugar levels, while the bigger ones may not even react. The UK is a relatively small market for massive global players like Coca-Cola or PepsiCo, so any loss in revenue would possibly be smaller than the costs of reformulation.”
Taxes and calorie reduction initiatives
As to whether the tax will combat obesity, the soft drinks industry argues that it has already been working on reducing calories, explains Rachel Arthur of BeverageDaily.
“Soft drinks manufacturers will tell you they’ve already done a lot to reduce calories across their beverage portfolios without a tax,” she says. “We’ve seen a huge increase in lower and no calorie varieties, we’ve got nutritional labeling to show consumers exactly how many calories are in each package, and we’ve got smaller pack sizes to help people control portion sizes.”
However, the tax could prompt more R&D into alternative sweeteners, such as stevia.
Oliver Nieburg of ConfectioneryNews asks whether the tax could extend to other food categories.
“The confectionery industry can’t escape the fact that it is one of the biggest contributors to added sugars in the global diet.
“A 2015 report by the US Department of Agriculture (USDA) said sweets & snacks were a “major contributor” to added sugars, accounting for 31% of the ingredient in the American diet - behind only beverages (47% of added sugar intake).”
“Many single-serve confectionery items consumed alone near or surpass WHO sugar recommendations.
“It would not surprise me at all if a government decided to put a tax on other categories.”