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Sugar tax oped

OP-ED: Nanny Gordhan’s sugar tax-grab

The nannies in government are falling over themselves trying to regulate what South Africans may or may not eat. Pravin Gordhan, who is in charge of tax collection, is the latest to wage a war against a major food ingredient. This time the victim is sugar. Well-known Daily Maverick, columnist, Ivo Vegter, weighs in… 

The National Treasury has proposed a sugar tax amounting to about 20% on sugar-sweetened drinks, including soft drinks, fruit drinks other than 100% fruit juice, sport and energy drinks, vitamin water, iced tea and lemonade. Natural sugars in unsweetened products will be excluded.

The tax will be levied from 1 April 2017 at a rate of 2.29 cents per gram of sugar, and products that do not label their sugar content will be presumed to contain 50g/330ml, compared to Coca-Cola’s 35g per serving.

The ostensible aim is to reduce obesity in the general population by 10% by 2020, by implementing the World Health Organisation’s “Global Action Plan” to reduce the intake of free sugars.

In its statement, Treasury claims: “Fiscal interventions such as taxes are increasingly recognised as effective complementary tools to help tackle the problem of negative externalities associated with pollution, smoking, excessive alcohol consumption and also the obesity epidemic at a population level.”

Taxes certainly can be used to distort the market, and thereby give effect to policy. Assuming sufficient price elasticity, higher prices tend to reduce consumption, and vice versa. But if they want to use tax as a policy instrument, a sincere government would make it revenue-neutral.

Just as with the proposed carbon tax, there are no offsetting tax cuts, nor are there plans to ring-fence the sugar tax to spend it on public health campaigns related to obesity, heart disease, cardiovascular disease, or diabetes.

It’s just another tax-grab, designed to fill National Revenue Fund coffers.

Unlike Aaron Motsoaledi, the Health Minister who is a committed nanny with a record of ignoring available science, Treasury Minister Gordhan’s job description is to broaden the tax base and increase tax revenue. A sugar tax, like a carbon tax, fits the bill nicely.

In the words of Ronald Reagan: “Government’s view of the economy could be summed up in a few short phrases: If it moves, tax it. If it keeps moving, regulate it. And if it stops moving, subsidise it.”

The Treasury discussion paper on sugar tax characterises South Africa as “the most obese country in sub-Saharan Africa”. What it fails to note is that sub-Saharan Africa is the only region in the world in which obesity is not very common. It is also the poorest region in the world. That we’re heavier than the rest of sub-Saharan Africa is actually an indication that we’re healthier.

According to Treasury, obesity rates in South Africa are 42% among women and 13% among men, giving an average of about 27.5%. Unfortunately, its source for these statistics is not available for public scrutiny, unless you’re willing to cough up $35.95 (R535) for access. They differ greatly from the only publicly available country ranking I could find, which has the numbers as 8.8% among men and 27.4% among women, for an average of 18.1%. That would put South Africa 57th in the world, well below countries such as the US (33.9%), Mexico (29.4%), and Egypt (46.6%).

The reason to cite Mexico is that it is in the vanguard of sugar taxation, having implemented a 10% tax on sugar-sweetened drinks in January 2014. There is no clear evidence that it worked, however. Simple sales statistics show that soft drink sales have increased since the tax was introduced. Per-capita consumption showed a slight increase, at 162 litres per year in 2014 and 161 litres in 2015, compared to 160 litres per year in the 2007 to 2013 period.

The Mexican government has argued that it is “erroneous” to conclude an increase in sales, because of other confounding factors, such as climate, tough economic conditions, and new marketing initiatives. But if less disposable income, a marginally hotter summer and a few adverts are enough to wipe out all the gains from the tax, perhaps the effort isn’t worth it.

Even if you assume that confounding factors hide the decline in sugary beverage consumption, there is no evidence of any impact on health outcomes. Perhaps only healthy people are drinking less soda.

If evidence of a positive impact on health does eventually emerge, we’re talking about making a small change in daily sugar intake, which itself is a small percentage of overall calorie intake, to marginally affect health outcomes, in only a minority of people. Taxing all sweetened drinks is a very high price to pay for such a small potential benefit.

It bears remembering that the reason there’s so much sugar in processed foods in the first place is not because government failed to intervene, but because government did intervene….

Daily Maverick: Read the full article

Related reading:

SA’s sugar tax: Govt outlines its proposed rate

EDITORIAL: Sugar tax must be even-handed

SA’s impending sugar tax: bitter debate for and against