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UK To Introduce 'Sugar Tax' On Soft Drinks

by Robert Lee, Tax-News.com, London

18 March 2016


UK Chancellor George Osborne has announced plans to introduce a new levy on companies that produce sugar-sweetened soft drinks, which is expected to raise GBP520m (USD742.8m).

Osborne made the announcement as part of his 2016 Budget. Addressing Parliament, he said: "Five-year-old children are consuming their body weight in sugar every year. Experts predict that within a generation over half of all boys, and 70 percent of girls could be overweight or obese." He added that obesity increases the risk of cancer, diabetes, and heart disease, and that "one of the biggest contributors to childhood obesity is sugary drinks."

The tax will be levied on drinks companies, and will be assessed on the volume of the sugar-sweetened drinks they produce or import. There will be two bands: a lower band for total sugar content above five grams per 100 milliliters; and a higher band for drinks with more than eight grams per 100 milliliters. Pure fruit juices and milk-based drinks will be excluded, and the smallest producers will be kept out of the scope of the levy.

The Government will consult on the design of the new tax. Osborne said it will be introduced in 2018, "to give companies plenty of space of change their product mix."

"We understand that tax affects behavior. So let's tax the things we want to reduce, not the things we want to encourage," he said.

The Office for Budget Responsibility (OBR) estimates that this levy will raise GBP520m. The money raised will be used to double the amount of funding the Government dedicates to sport in primary schools.

The announcement was welcomed by Public Health England. Chief Executive Duncan Selbie said: "A sugary drinks levy is fabulous news for children and families in helping them to cut back on sugar. This will reduce the risks of obesity, tooth decay, and other life-threatening diseases. This is public health in action and a great foundation ahead of the [publication of the Government's] child obesity strategy later this summer."

The British Medical Association (BMA) also signalled its approval of the measure. It has previously argued for the introduction of a tax on sugar-sweetened drinks that would increase the price by at least 20 percent.

According to the BMA's Board of Science Chair, Sheila Hollins, Osborne's policy is "an important initiative that could help to begin to address the obesity crisis among young children." She nevertheless expressed disappointment that the tax will not be introduced until 2018, and stressed that the Government should likewise seek the introduction of minimum alcohol unit pricing to combat excessive alcohol consumption.

The measure has been criticized by industry group the British Soft Drinks Association. Director General Gavin Partington said: "We are extremely disappointed by the Government's decision to hit the only category in the food and drink sector which has consistently reduced sugar intake in recent years – down 13.6 percent since 2012. We are the only category with an ambitious plan for the years ahead – in 2015 we agreed a calorie reduction goal of 20 percent by 2020."

"By contrast sugar and calorie intake from all other major take-home food categories is increasing – which makes the targeting of soft drinks simply absurd."

TAGS: tax | value added tax (VAT) | public health | United Kingdom | Health tax | food | health care | tax rates | tax reform | retail | trade association | trade

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