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Irish Drinks Industry Calls For Sugar Tax Delay

by Jason Gorringe,, London

05 September 2017

The Irish Beverage Council (IBC) has urged the Government to defer plans for a tax on sugar-sweetened drinks until there is greater clarity on Ireland's post-Brexit trading relationship with the UK.

In its pre-Budget submission, IBC argued that "the lack of an evidence-based health rationale, the uncertainty as to how the tax will work, possible infringement of EU law, and the total lack of clarity about our post-Brexit trading relationship, mean it is impossible to design a fair or equitable sugar-sweetened drinks tax." It said that deferral is "only logical in the circumstances."

IBC Director Colm Jordan said: "With the Euro in our pockets now buying more against Sterling, Irish shoppers are increasingly heading North. The Minister for Finance must defer his plan for higher taxes on our weekly shop."

"We are forecasting that 11 percent of sugar-sweetened drink sales will be lost to cross-border shopping and the unofficial grey market. That amounts to a EUR30m (USD35.7m) loss to our economy in a full operating year of the sugar tax. This must be seen in context; the soft drink tax will only raise EUR40m."

The Government intends to introduce a tax on sugar-sweetened drinks from April 2018. The Department of Health has proposed that the tax should apply to water-based and juice-based drinks that have an added sugar content of five grams per 100ml and above.

The UK also plans to introduce a tax on sugar-sweetened drinks from April 2018, with two rates based upon the total added sugar content. The Irish Government wants to align its model with that of the UK.

The IBC submission emphasised the significance of the UK market to the Irish beverage industry and argued that, given the challenge posed by Brexit, the Government should be supporting, not taxing, the industry.

According to IBC, the majority of soft drinks consumed in Ireland are imported, with the supply chain highly integrated across Ireland, Britain, and Northern Ireland. It said that as the arrangements that will apply to post-Brexit transactions between Ireland and the UK are not yet know, it is impossible to assess the degree to which their respective sugar tax regimes will be aligned.

IBC pointed out that as the UK intends to leave the customs union, additional costs will apply on cross-border trade, and that it is possible that packaging and labelling requirements for products in Ireland and the UK may diverge, creating practical differences for the application of the Irish tax on products imported from or exported to the UK.

The submission also observed that there are 231 entry points between Ireland and Northern Ireland and, with no customs controls at these points, any imports of soft drinks by wholesalers would need to be subject to voluntary declaration and self-assessment. It said: "The proposals have the potential to open up a grey and black market for soft drinks through imports, without a clear, adequate system of checks and balances.

On the health front, IBC stated that only three percent of Ireland's calories come from soft drinks and that, by reformulating their products, IBC members "took 10 billion calories out of the Irish diet each year between 2005 and 2012." It added that the introduction of similar taxes elsewhere in the world has failed to reduce consumption of soft drinks.

IBC said that if the Government did choose to introduce the tax, any legislation should include a sunset clause and provisions for a review, should the measure prove ineffectual.

TAGS: tax | Ireland | public health | law | United Kingdom | Health tax | ministry of finance | legislation | tax rates | tax reform | trade association | trade | European Union (EU) | Europe

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