24 Aug 2016 Sugar tax would have dire economic consequences, Bevsa says

Briefing the media on the industry’s submissions to the Treasury yesterday on the proposed levy, the industry said the tax would cost the fiscus an additional R3.8bn, with small-scale farmers and spaza shops most affected.

A study commissioned by the industry poked holes in the supposed fiscal and health benefits of the tax, Bevsa executive director, Mapule Ncanywa, said, with the industry calling on the Treasury to make available its own socioeconomic study on the effect of the levy.

Along with the tax implications of 68,000 jobs and the collective cost of job losses to the fiscus, the tax represented a cost of R3.8bn, Ncanywa said.

“From a tax (that the) Treasury was expecting — R7.6bn in revenue — they will collect 41% less, or R4.5bn,” she said.

Health benefits were also highly uncertain, with the industry estimating it would lead to a 0.3% reduction in average kilojoule consumption.

The sugar tax, along with proposed increased taxes on tyres and fuel, have been identified by the Treasury as potential revenue streams of up to R15bn for the state. The tax also is seen as a potential means to combat the growing problem of obesity and lifestyle-linked diseases such as diabetes.

Monday marked the deadline for submissions on the proposed tax of 2.29c per gram. The tax, if implemented, would come into effect in April 2017, with the industry saying it represents an effective 20% tax on its products, which would disproportionately affect the poor.

The industry, however, maintained that the proposed tax was excessively weighted against the industry, which would experience volume declines of about 31%.

“It may sound small, but it is a huge number,” Ncanywa said. “This tax definitely discourages growth. It is anticompetitive because you are singling out one industry in terms of sugar and you leave the rest,” she said.

The industry said international experience of the tax had led to some countries, such as Denmark and Finland, beginning to reverse such a tax due to its failure to address obesity.

In Mexico, 64% of the tax came from lower socioeconomic households, with 38% paid by people below the poverty line.

SoftBev CEO, Brett Naidoo, said the company had recently cancelled R100m in investment due to uncertainty, and expected the smaller-sized companies it dealt with to disproportionately be affected.

“Those suppliers do not have the balance sheet to survive a shock to the system like the impact this would have,” he said.

Bevsa chairperson and MD at Coca-Cola Beverages SA, Velaphi Ratshefola, said the industry sought a more collaborative approach to the obesity issue and self-regulation.

“If the government, through this paper or tax is targetting 9% calorie reduction, we think if we work together we can double that reduction,” he said.

Little Green Beverages director, Glenn Sheppard, said on Tuesday the tax was “economic suicide”, adding that despite this, he had doubts it was proposed with an eye on health benefits.

Meanwhile, the DA has said it would reject the proposed tax if its purpose was “simply to raise more revenue under the fig leaf of a public health benefit”.

The party’s Dr Wilmot James said that it had “made submissions on the proposed Taxation of Sugar-Sweetened Beverages (SSBs)‚ which was gazetted by National Treasury for public feedback on July 8”.

James said a “meaningful portion of this revenue should be ring-fenced for medical research”‚ and posited that “if the tax is clearly structured to fund medical research on obesity‚ diabetes‚ hypertension and social habits that result in an increase in body mass index (BMI)‚ its purpose would be more defensible”.

James said that rather than seeing the “beverage industry as an enemy of change”‚ the sugar tax should be “structured to encourage product innovation”.

“This would entail a graduated tax on manufacturers that would prompt companies to innovate and develop their product range to include drinks that fall under a proposed sugar threshold that attract no additional taxes‚” he explained.

Treasury dismissed industry fears

The Treasury, meanwhile, has dismissed claims by the beverage industry that thousand of jobs will be lost and hundreds of small businesses will shut if a proposed sugar tax is implemented.

To quell ongoing speculation about the effects of the sugar tax, the Treasury plans to conduct an impact study that may shed further light on the possible impact of the tax on the economy.

“The results of the impact study will be made available when we give feedback on the comments on the policy paper towards the middle of November 2016,” the Treasury said.

Source: BDLive.co.za; Bevsa

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