The soft drinks industry’s representative organisation the Irish Beverage Council recently published an analysis of the impact of a possible sugar tax on soft drinks as part of its pre-Budget submission.
This sets out the resultant economic damage to consumers, business and the Irish economy and also examines the international evidence which points to no resulting health benefits.
About 60% of the soft drinks market here is sugar-sweetened and the Government made a commitment to introduce a tax on sugar-sweetened drinks to help offset cuts in the Universal Social Charge as part of its Programme for a Partnership Government last May. It estimated that such a tax could yield over €100 million a year as well as having health benefits.
In publishing its Sugar Tax: all cost, no benefit report for the Finance Minister in advance of Budget 2017 – and prior to the above postponement announcement – the IBC pointed out that sugar taxes have never achieved the public health objectives of reducing sugar consumption or decreasing levels of obesity, overweight and related diseases in a number of other countries where such as tax was introduced.
Instead, the consequences of such additional discriminatory charges have increased grocery bills for families, spurred cross-border trade and smuggling, increased costs on businesses and threatened jobs.
“Industry has a crucial role to play in tackling the serious obesity problem in Ireland,” commented IBC Director, Kevin McPartlan, “However, it’s vital that the focus is on interventions that make a genuine and sustained positive impact. A sugar tax may be populist but it’s simply not supported by evidence. International experience proves beyond any doubt that sugar tax is singularly ineffective.”
The report finds that the proposed 10c tax on a can of soft drink would result in the average Irish household’s annual grocery bill increasing by €60 and the Irish exchequer losing revenue of €35 million per year.
“Some say a sugar tax should be introduced even if it does nothing to reduce levels of obesity as it would create revenue to fund public health initiatives,” continued Kevin McPartlan, “Even if we ignore the fact that Department of Finance officials have ruled out such an approach, the revenue lost to cross-border trade and the potential cost of lost jobs in the Irish soft drinks sector would greatly reduce and possibly even eliminate the net gain to the exchequer.”
Denmark, for example, introduced a tax on sugar-sweetened drinks but abandoned it after just 15 months as consumers simply travelled to Germany and Sweden to purchase soft drinks, losing significant VAT to the Danish economy.
A recent comprehensive report conducted by Food and Drink Industry Ireland found that through reformulating existing drinks and introducing new products, IBC members had removed over 2,500 tonnes of sugar and 10 billion calories from the Irish diet in the seven years to 2012. This was at no cost to consumers. Imposition of a sugar tax would threaten soft drinks companies’ capacity to continue investment in such initiatives, he pointed out.
Meanwhile the UK’s soft drinks industry has warned that a sugar tax will cost up to 4,000 jobs there.
Referring to a report on the subject carried out by Oxford Economics, the British Soft Drinks Association’s Director General Gavin Partington pointed out, “This research shows the soft drinks tax is not only ineffective in fighting obesity but will come at a significant price for the economy, costing thousands of jobs”.
However the UK’s decision to Brexit has also thrown the planned introduction of the tax in 2018 into doubt.