15 May 2017 Sugar Tax Q&A
We answer your burning questions on the UK Sugary Drinks Industry Levy.
What is a ‘Soft Drinks Industry Levy’ and how will it work?
The UK Soft Drinks Industry Levy (SDIL) is a new levy which was announced last spring by David Cameron’s Conservative Government. It will apply to the producers and importers of soft drinks which contain added sugar. It forms a major part of the Childhood Obesity Plan which was published last summer.
It will function as a two-tiered levy with drinks either falling into the lower threshold of 18p/litre for drinks with 5g+/100ml and 24p/litre for drinks with 8g+/100ml.
Industry have several options. To pay the tax from their own profits. To reformulate their products so that they are under the tax threshold and are therefore exempt from paying the tax. Or, to absorb the cost of the tax by increasing the price of their products. It is hoped that industry will opt one of the first two options, as the Government have specifically stated the tax is not a tax on consumers.
Are all drinks included in the levy?
Drinks with a high milk and fruit juice content will be excluded from the levy, as they either don’t contain any added sugar during processing or contain other important nutrients which are important for a healthy diet. Alcoholic drinks will also be excluded, except for those containing up to 1.2% ABV alcohol. Baby formula drinks and other products used to treat medical or dietary conditions will be exempt.
When will it start?
Proposals state the tax will come into action in April 2018.
How will the money be used?
Initially, projections suggested the revenue of the tax would be £520m in its first year. However, with many companies such as Ribena and Tesco already carrying out reformulations to escape the tax, it is now expected to generate £400m in its first year. The money will be put towards funding for school sports, breakfast clubs and after school clubs.
How will it be monitored?
The levy will be monitored through information gathered from tax returns. It will be kept under review through communication with affected taxpayer groups.
Who opposes it?
Industry have been highly critical of the UK SDIL since it was announced last year, with Coca Cola even suggesting plans to sue the Government. They argue against the evidence-base on the effectiveness of food taxes, claim it will result in job losses and argue they are doing their bit towards sugar reduction.
What are the protected benefits?
The UK population in all age groups consumes too much sugar and considering the links between excessive sugar intake and obesity, type 2 diabetes and other non-communicable diseases, the levy is projected to benefit the health of the UK population.
Has it worked before?
Mexico’s sugar tax has resulted in a two-year average fall of 7.6% in soft drinks consumption, however it is still too early to see if it has had any impact on obesity rates. California is another successful example of a tax on sugary drinks, in just one year consumption of sugary drinks fell by 21% and water consumption increased by over a third. Whilst the UK tax works slightly differently, it hopes to replicate some of these positive impacts to help improve population health.
Will the general election affect the sugar tax?
The SDIL was confirmed in the 2017 spring budget by Phillip Hammond. However, with a snap general election called, there were concerns that plans would be overhauled. As it stands, the three main parties have committed to implementing the SDIL in their manifestos.
If you have any further questions you would like us to include on here please get in touch via the contact page.
Cochero, M.A., Dommarco-Rivera, J., Popkin, B.M. and Ng, S.W. (2017). In Mexico, Evidence of Sustained Consumer Response Two Years After Implementing A Sugar-Sweetened Beverage Tax. Health Affairs. pp.12-31.
Falbe, J., Rojas, N., Grummon, A.H. and Madsen, K.A. (2015). Higher Retail Prices of Sugar Sweetened Beverages 3 Months After Implementation of an Excise Tax in Berkeley, California. American Journal of Public Health. V.105 (11), pp.2194-2201.
HM Revenue & Customs. (2016). Soft Drinks Industry Levy [online]. Available at: https://www.gov.uk/government/publications/soft-drinks-industry-levy/soft-drinks-industry-levy [Accessed: 8th May 2017].