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COMMENT: Taxing sugar, not alcohol, will lead to a healthier way of life

Michael Fridjohn, leading wine writer and visiting Professor of Wine Business at the Graduate School of Business, UCT, has written a hard-hitting op-ed where he puts his case for the state to tax sugar as a far more effective measure to control human behaviour and roll in the tax revenue.

IN mid-November the Treasury hosted a workshop aimed at engaging with stakeholders on the subject of alcohol excise. From the first session it was clear the purpose of the event was to excoriate the demon drink as a prelude to justifying more onerous taxes on the sector.

This much was evident from the way the agenda had been drafted: representatives from organisations dealing with the consequences of alcohol abuse were up first, setting the tone for the discussion.

Economists “showed” that revenues from alcohol taxation were insufficient to “recover” the full costs to society from the damage wrought by alcohol abuse. One even suggested that the value added tax earned from liquor sales should be discounted from the industry’s “contribution” because, in the event of consumers giving up drink, they would be spending the money on other goods and services.

In short, the event served as window-dressing for what will be an ever-tightening tax squeeze to feed the insatiable cash needs of a profligate government.

Supporting the implicit view that moral right was on the side of higher alcohol imposts, the Treasury’s independent advisers constantly referred to the gains — in public health terms — achieved as a result of the campaign against tobacco products waged over the past two decades.

They were deaf to the arguments that the massively increased tobacco taxes had driven a significant percentage of total consumption underground, and they were in denial that raising the excise would fuel the burgeoning illicit liquor sector. It was apparent that they were not going to see that policing had played a key role in limiting tobacco usage: with the onus on restaurateurs and shopping centre management to control smoking in public places, the job was being done for the authorities — no one was relying on the police to play a role in modifying human behaviour.

The term “sin tax” has been in use for so long that it’s acquired a kind of legitimacy. Why should certain human indulgences be thought of as sinful, and why, for that matter, should a puritanical view of the universe be allowed to prevail in a secular state? We don’t impose a tax on polygamy, nor are there any particular tax benefits for ascetics. Neutrality in terms of choice, alongside freedom to choose, is a basic tenet of our constitution…..(read more here…)

….So what would have been the smarter way for the Treasury to approach this, one that would widen the tax net, improve the average health of our citizens, and effect a change in behaviour which would bring a quantifiable benefit to the country?

Some time ago I put a proposal to the Treasury for a tax that was easy to collect. I suggested an excise on sugar in all its forms — sucrose, fructose and dextrose (all of which can be used to produce alcohol, legally and illegally). The rate of taxation could be calibrated in proportion to the amount of sugar necessary to yield the requisite alcohol in the various beverage classes.

In other words, alcohol excise would be based on both the alcohol (transformed sugar) and the residual sugar. “Alcopops” and ready-to-drink beverages — which are gateway beverages for teenage drinkers and where the sugar and the alcohol together would bump up the excise — would suddenly be more highly taxed.

By focusing on the key component that produces alcohol, and extending it to cold drinks, fruit juices and all foodstuffs to which sugar is added, from breakfast cereals to marinades, the taxman would open up a limitless revenue source, have an opportunity to modify what people consume, and make it vastly more difficult to produce illicit alcohol. This would also help to address public health issues like obesity and diabetes as well as alcoholism, and contribute (to the extent that people are economically rational) to a healthier way of life for all South Africans.

However, judging from the outcome of the workshop, it seems the Treasury was merely paying lip service to the idea of using taxation to encourage better lifestyle options. It’s really only about the money. If you always do what you always did, you always get what you always got. Read his full column here

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