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10 reasons why the sugar tax is a terrible idea

25 March 2016

9:11 AM

25 March 2016

9:11 AM

  1. It will hit Consumers: The tax is designed to be levied on soft drinks companies, based on the volume of sugar-sweetened drinks they import of export. But the independent economic forecaster, the Office of Budgetary Responsibility, states the costs of the levy will be ‘passed entirely onto the price paid by consumers’. That means it will be the public, not soft drinks companies that end up paying the costs of the new tax.
  1. It will actually cost the Treasury money: The levy is expected to raise a maximum of £520 million per year. However, because the levy pushes up inflation, the British Government will be hit with a £1 billion bill in 2018/19 because of increased costs of borrowing. And the Government will have to pay this £1 billion up front – before money from the levy finally arrives in the Treasury’s coffers.
  1. It’s badly targeted: Because fruit juices and milk-based drinks are excluded, it means some of the most-sugary drinks escape the levy. For example, a standard Starbucks extra-large hot chocolate contains 15 teaspoons of sugar – double the recommended daily maximum for an adult. But because it’s a milk-based drink, it is exempt from the levy. The same can be said for other milkshakes, coffee and yoghurt-based drinks.
  1. The tax will hit the Poorest Hardest: Consumption Taxes always hit the poorest hardest. The poorest 10% of households already pay more than 20% of their gross incomes on duties and VAT – more than double the average household. This tax will only add to that burden.
  1. It’s poorly designed: The proposed tax is crudely designed with a levy per litre of a sugary soft drink – not by grams per litre. That means many of the drinks with a high sugar content will actually attract a lower tax! The Institute for Fiscal Studies give the example of Sainsbury’s Orange Energy Drink and Coca Cola – two drinks which would be taxed at the higher rate of 24 pence per litre. Three litres of Coca Cola contains 318 grams of sugar – the same amount as two litres of orange energy drink. But because the tax is designed per litre, you would pay 72 pence of tax on three litres the Coca Cola, compared to 48 pence for the energy drink for two litres of energy drink. The tax’s poor design means it fails to penalise the drinks with the higher sugar content.
  1. It could raise costs all round: The tax is levied on soft drinks companies – not the drinks themselves. To cover the costs, soft drinks companies may raise the costs of other products, not just the sugary drinks. For example, a soft drink company could raise prices on their entire range instead of specifically targeting their sugary drinks products.
  1. People will switch to other sugary products: The IFS has also suggested that consumers may switch to other products with high sugar contents to get their fix of sugar. Only 17% of added sugar consumption comes from sugary drinks. The tax does nothing to change these underling behaviours which lead people to seek out sugar in their diet. It appears bizarre that yoghurt, cereal, confectionary or chocolate won’t be affected at all by the new levy, despite often containing higher sugar contents than soft drinks.
  1. It will harm our Pub Trade: £2.8 billion worth of soft drinks are sold in British pubs and clubs each year. That’s nearly double the value spent on cider. In his Budget speech, the Chancellor explicitly stated he wanted to support British pubs and froze cider duty. But the new levy will harm pubs by pushing up the costs on soft drinks – one of their most popular products.
  1. Soft Drinks Consumption is Actually Falling: As the Government’s own Family Food Survey states, purchases of soft drinks (not low calorie) have decreased 19% since 2011. Moreover, low income households’ soft drinks purchases have dropped 14% from 2007 to 2014. But confectionary purchases have actually risen 1%. It shows the levy is poorly targeted and doesn’t address the underlying causes of sugar consumption, which is not soft drinks.
  1. Similar Taxes have not Worked Abroad: Sugar Tax advocates point to the effect of a sugar tax in Mexico. But research shows a link cannot be drawn between decreased sugar consumption and the tax being introduced. Moreover, the tax has had a negligible impact on calorie intake and obesity. In developed nations where soft drinks taxes have been introduced, like France, Denmark and US states, they had a negligible impact on calorie consumption and obesity. 

    Will Quince is the Conservative MP for Colchester

 

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