Wednesday, 16 March 2016

UK to tax production of sugary soft drinks

In the 2016 Budget statement the UK Chancellor (Finance Minister) announced that a levy will be charged on manufacture of sugar sweetened soft drinks. Fruit juice and milk products will be excluded. It is expected to raise £520m (US$730m, €660m) in the first year 2018-19 (UK tax years start on 6th April) declining annually thereafter (£500m, £445m....)

Budget 2016 announces a new soft drinks industry levy targeted at producers and importers of soft drinks that contain added sugar. The levy will be designed to encourage companies to reformulate by reducing the amount of added sugar in the drinks they sell, moving consumers towards lower sugar alternatives, and reducing portion sizes.
Under this levy, if producers change their behaviour, they will pay less tax. The levy is expected to raise £520 million in the first year. The OBR expect that this number will fall over time as the total consumption of soft drinks in scope of the levy drops, in part as a result of producers changing their behaviour and helping consumers to make healthier choices.
According to the British Soft Drinks Association some 45% of carbonated drinks are "regular" rather than "mid" or "no/low" calorie at 6 and 49% respectively.   With a 2014 volume of 6380 million litres of total carbonates that makes 2870 m litres of regular sugar sweetened beverage so the proposed levy looks to cost 18 p/litre (25 US cents).

With the detail to be worked out and various exemptions for small producers etc the exact cost implication to the consumer remains to be seen. The sugar in a litre of 10% SSB probably costs ~4p so this levy is substantial compared to the manufacturer's costs.

There are two bands of levy proposed :-

Soft drinks industry levy
Soft drinks industry levy – The government will introduce a new soft drinks industry levy to be paid by producers and importers of soft drinks that contain added sugar. The levy will be charged on volumes according to total sugar content, with a main rate charge for drink above 5 grams of sugar per 100 millilitres and a higher rate for drinks with more than 8 grams of sugar per 100 millilitres. There will be an exclusion for small operators, and we will consult on the details over the summer, for legislation in Finance Bill 2017 and implementation from April 2018 onwards. (Finance Bill 2017)