Brits Embrace Soda Tax
- Sales Tax News
- May 2, 2016 | Gail Cole
Americans may associate Great Britain with tea or pints of beer than soda, but Brits regularly consume more than 6300 million liters of carbonates annually — more than 100 liters per person. Could that be why obesity levels in Britain are soaring? The UK is number 23 on the list of most obese countries in the world, with a quarter of adults qualifying as obese. According to a report created by the academy of Medical Royal Colleges, obesity is “the biggest public health crisis facing the UK today.”
Soda is certainly not the only culprit, but it is a widely accepted contributor (the soda industry is quick to point out that there are other causes). Many experts link sugary drinks to childhood obesity, so to help combat it, Britain’s Chancellor of the Exchequer George Osborne has announced a new sugar levy on the soft drinks industry.
Tax affects behavior
In stark contrast to the soda taxes that have been introduced (and largely rejected) in this country, the British tax will be levied on companies (not consumers) and “assessed on the volume of the sugar-sweetened drinks they produce or import.” The plan exempts the “smallest producers,” as well as pure fruit juices and milk-based drinks. It also applies tax at two different rates (not yet firmly set):
- Approximately 18 pence per litre for drinks with a total sugar content above 5 grams per 100 millilitres (17.7 g per 12-oz can)
- Approximately 24 pence per litre for drinks with a total sugar content of more than 8 grams per 100 millilitres (28g per 12-oz can)
To quote the Chancellor: “We understand that tax affects behavior. So let’s tax the things we want to reduce, not the things we want to encourage.” The hope is that businesses in this industry will ultimately reduce the amount of sugar in beverages to earn more favorable tax treatment.
Misguided but effective
The soft drinks industry is on it already, but in response to consumer demand, not the tax. According to their 2015 UK Soft Drinks Annual Report, “[A]lmost half of all carbonates [which includes fruit juices and sport and energy drinks] sold in the UK are low or no calorie.” This is a new phenomenon, attributed in part, says the report, to the ongoing “misguided campaign on sugar.”
To capture sales of calorie-counting Brits, the industry is encouraging consumption “of drinks containing fewer calories.” Indeed, Mr. Osborne has credited many soft drink companies for reformulating their products to reduce or remove sugar. He noted, “So industry can act, and with the right incentives I’m sure it will.” With two years’ time between the announcement of the tax and its imposition on April 1, 2018, the Chancellor believes the soft drinks industry has time to “change their product mix” in order to incur a lower tax rate.
The tax on sugary beverages is expected to generate £520 ($730) million, money that will fund primary school sports programs. Professional chef and soda tax advocate Jamie Oliver is reportedly pleased. The Soft Drinks Association is not. In its response to the levy, it called the targeting of soft drinks “absurd.”
Taxing our way to better health?
Will the tax on the soft drinks industry improve the health of Brits? The effects of soda taxes on soda consumption in specific and health in general are not yet known, but evidence is being compiled. Mexico has levied a tax on sugary beverages since January 2014, and preliminary data suggests that it the tax may be curbing consumption, especially among low-income Mexicans. Early studies suggest that higher prices caused by the soda tax in Berkeley, California, might also be reducing intake.
Slimmer waists will most certainly take more than a soda tax, but Chancellor Osborne hopes this will be a step in the right direction.
Do business in Britain? Get help with global value added tax compliance.