Sugar tax may exceed proposed 20%

National Treasury is proposing a 20% sugar tax on sugar sweetened beverages to be implemented on 1 April 2017. The aim of the sugar tax is to reduce the excessive consumption of sugar. The draft legislation has been published for public comment, which is open until 22 August, when all submissions must be in. However, there are concerns that the tax may exceed the proposed 20% when inflation is factored in.

While a rate of 20% has been proposed, Treasury noted that this will need to be adjusted in the future to keep up with inflation. “Specific rates (e.g. cents per gram) are often much easier to administer but require regular updates / increases in the rate, to at least keep up with inflation.”

The proposed tax rate

Treasury highlighted that literature suggests that a tax of 20% of the price of sugar-sweetened beverages (SSBs) would have a significant impact on the purchase and consumption of these drinks. This in turn would have an impact on obesity and the health of the country’s population.

“It is therefore proposed that a tax rate of R0.0229 (2.29 cents) per gram of sugar be implemented based on the current product labelling framework. This rate roughly equates to a 20 per cent tax incidence for the most popular soft drink (i.e. Coca Cola, averaging 35 g / 330 ml). For SSBs that currently do not apply nutritional labelling, it is proposed that a relatively higher fixed gram of sugar be assumed (i.e. 50 grams per 330ml) as an incentive for producers to move towards nutritional labelling until mandatory labelling legislative framework is put in place,” explained Treasury.