South Africa to tax soda, April 2017
- Sales Tax News
- Mar 6, 2017 | Gail Cole
The first soda tax on the African continent will be introduced on April 1, 2017, when a proposed 20 percent tax on soft drinks is expected to take effect in South Africa. Soda consumption in South Africa has been steadily growing for at least 30 years, as has the country’s rate of obesity — it is now ranked the most obese country in Sub-Saharan Africa. Alarmed by the obesity epidemic, South Africa’s Department of Health has developed a plan to reduce the nation’s obesity rate by 10 percent by 2020; encouraging physical activity is an integral part of that plan, as are taxes on sugar-sweetened beverages (SSBs) and sugary and high-fat foods.
Finance Minister Pravin Gordhan addressed the sugar-sweetened beverages tax in his 2017 Budget Speech. He said the ministry and the Department of Health were working together to craft the tax, which had been “revised to include both intrinsic and added sugars.” The tax is set to be implemented sometime later this year “once details are finalized and the legislation is passed.” An August 2016 government report on the proposed tax lists April 1 as the proposed start date.
The Treasury Department’s SSB proposal acknowledges that “the causes of obesity and being overweight are complex,” but it notes that “dietary intake and food choices play an important role.” It highlights findings from a 2015 World Health Organization (WHO) study, that “globally, fiscal measures such as taxes are increasingly recognised as effective complementary tools” to tackle obesity and the noncommunicable diseases that result from it (e.g., diabetes).
Yet soda taxes are not flawless. Taxes on consumption are widely considered to be regressive, and the proposal brings up concerns that a tax on SSBs will “cause harm to those most vulnerable in society.” However, it also notes that “obesity itself is a regressive disease that disproportionately affects those in lower socio-economic groups.”
The argument against taxing soda in South Africa
The Beverage Association of South Africa says that “one food item cannot be blamed for the country’s obesity issues.” Instead of taxing sugary beverages, the industry proposes “promoting light and zero-sugar options, portion control, and calorie consumption reduction per person per day.” It is for moderation, not taxes, and argues that reducing one’s daily calorie intake by 14 percent is 2–5 times more effective than a tax on sugar (BEVSA).
Another argument against a soda tax is that government should not interfere with a person’s “right to choose.” One man told the BBC that, instead of taxing sugary drinks, the government should “look at making healthier food cheaper.”
Opposition to the tax is also coming from the South African Sugar Association (SASA), which argues, “The imposition of [a tax on sugar-sweetened beverages] would have far-reaching ramifications for the industry and all those dependent on it for their livelihood.” It predicts a tax on SSBs would “compound unemployment challenges” where sugarcane is grown, hitting “poor, emerging farmers and small businesses” the hardest. Finally, SASA says “there is no scientific evidence” that such a tax would “automatically lead to reduced levels of obesity” and related diseases (South African Sugar Association Urges Treasury to Reconsider Tax).
Do soda taxes work?
Taxes that target sugary beverages are relatively new; if they exist, it will take time for any health benefits to show themselves. Yet there is some evidence that they do curb consumption. Mexico has imposed a special tax on sugar-sweetened beverages since Jan. 1, 2014, and a recent study found that purchases of affected drinks are down. A similar tax in Berkeley, California (effective Jan. 1, 2015) also seems to be curbing consumption of taxed beverages — at least within city limits. And the World Health Organization reports that increasing the retail price of sugary drinks by 20 percent “would result in proportional reductions in consumption of such products.”
Effective or not, soda taxes seem to be on the rise. The United Kingdom is working on a Soft Drinks Industry Levy, which is expected to take effect in April 2018. In the United States, a sweetened-beverage tax recently took effect in Philadelphia, and similar taxes are under consideration in Seattle, Santa Fe, and elsewhere. Find more posts about soda taxes here.
Tax automation software helps businesses stay compliant with changing sales and use tax rates and rules. Learn more.