The sugar tax (officially the Soft Drinks Industry Levy as it applies only to beverages) was announced in March as part of the 2016 Budget and will come into effect in April 2018, aimed at tackling childhood obesity.
Following Britain’s decision to leave the EU in June, and the subsequent shake-up in the UK government, some commentators had suggested that the sugar tax was now in the ‘political graveyard’.
Meanwhile, the Food and Drink Federation called for the sugar tax to be put on hold due to the fragility of the post-Brexit economy.
But today the government’s childhood obesity strategy has been unveiled, complete with details of the sugar tax and the launch of the consultation on the levy.
Industry 'disappointed'
The levy will apply to beverages with more than 5g sugar per 100ml.
Gavin Partington, Director General of the British Soft Drinks Association, said:“Given the economic uncertainty our country now faces we’re disappointed the Government wishes to proceed with a measure which analysis suggests will cause thousands of job losses and yet fail to have a meaningful impact on levels of obesity.”
He added that the category has ‘led the way in reducing consumers’ sugar intake’, down 16% from soft drinks since 2012. This is being done through reformulation and smaller pack sizes, and in 2015 the industry set a voluntary calorie reduction target of 20% by 2020.
“We’ll share the evidence during this consultation in the hope Ministers reconsider a measure that is both unnecessary and harmful to the economy,” added Partington.
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.
The government says its levy will encourage producers to reformulate and make drinks healthier.
Last week a report from Oxford Economics suggested the tax will reduce the industry's contribution to the economy by £132m and risk 4,000 jobs.
Milk, alcohol, plant-based drinks… what will the levy apply to?
The consultation launches today and runs for eight weeks, ending on October 13, 2016.
It seeks to address questions such as the definition of products in scope of the levy; appropriate treatment of certain products; the approach to compliance; and how to minimize administrative burdens.
What drinks could face the levy?
Subject to the levy:
- Soft drinks (with more than 5g sugar / 100ml)
- Cordials and squash
- Soya, almond, coconut milk
Excluded from the levy:
- Milk-based drinks
- Fruit juice
- Alcoholic drinks
The government says fruit juice (that does not contain added sugars) and milk-based drinks will be excluded from the levy; and part of the consultation seeks respondents’ views on how to define such drinks for this purpose.
Cordials, squashes and syrups will be taxed, on the basis of diluted volumes at their recommended dilution ratio as stated on the packaging. Therefore, a 1 litre bottle of cordial that can produce 5 litres of diluted drink will be taxed as 5 litres of drink.
The levy will not apply to alcoholic beverages with alcohol content above 0.5% ABV.
Plant milk drinks, such as soya, almond, rice or coconut milk may have added sugar, and therefore it is proposed they will be subject to the levy. In practice, however, many of these beverages will fall below the 5g sugar per 100ml threshold, according to the consultation document.
Small businesses are to be excluded from the levy, and the consultation seeks feedback on how a small operator should be defined.
The consultation documents, and details on how to respond, can be found here.
Once the consultation closes, the information gathered will be ‘taken into account in refining the design of the scheme’ and a formal response document will be published. This will be followed by a technical consultation on draft legislation and legislation in Finance Bill 2017. Liability for the levy will begin from April 2018.
Why does the government want to introduce a sugar tax?
By 2050, more than 35% of boys and 20% of girls aged 6-10 in the UK are expected to be obese. The predicted cost to the NHS is more than £6bn.
“A five year old should have no more than 19g of sugar in a day, but a typical can of cola can have 35g,” says the government.
“Many soft drinks contain no intrinsic nutritional value, and could be easily reformulated to contain less sugar. Some companies have already done this.”
The government says its focus is on driving such reformulation: “The levy directly targets the producers and importers of sugary soft drinks to encourage them to remove added sugar, promote diet drinks, and reduce portion sizes for high sugar drinks,” it says.
“If companies take the right steps to make their drinks healthier they will pay less tax, or even nothing at all.”
The levy is expected to raise £520m in its first year, with this money targeted at school-aged children with sports and programmes to encourage healthy lifestyles.