Tax on Sugary Beverages

April 21, 2017

The global obesity epidemic is a major concern for governments. The World Health Organisation (WHO) recently reported that a price increase of 20% or more will lower sugar consumption from soft drinks, thereby helping to reduce the occurrence of obesity, diabetes and tooth decay.

Increasingly, fiscal measures are being introduced throughout the world to promote health, prevent disease and to raise tax revenue.  So far, South Africa is the only country in Africa to introduce a “sugar tax”.
 
Since publishing its initial proposals for the tax on sugary beverages in July 2016, Treasury has introduced the following changes:

  • the introduction of a threshold of 4g/100ml below which the sugar content is not taxed. This is equivalent to almost a teaspoon of sugar per 100ml, which will not be taxed (the tax will therefore only be applied to the additional sugar above 4g/100ml)

  • the rate has been slightly reduced from 2.29c/g to 2.1 c/g

Putting this into context, this means that for a 330 ml can of Coca Cola, which contains just over eight teaspoons of sugar, the first 3 teaspoons will be tax-free (4g times 3.3, which is approximately three teaspoons), and the tax rate of 2.1c/g will be applied to the remaining five teaspoons. Thus, on a 330 ml can of coke, the tax will be 45.7 cents.  If the proposed sugar tax is implemented, the price of one litre of coke will increase by R1.39.

In line with international practice, 100% pure fruit juice and milk will be exempt from sugar tax. There is ongoing debate over the negative health benefits of 100% fruit juice, and therefore sugar tax on 100% fruit juice will be considered in the future.

Previous Finance Minister, Pravin Gordhan, announced in his Budget Speech that the sugary tax has been revised to include intrinsic and added sugars. The draft 2017 Rates and Monetary Amounts and Amendment of Revenue Laws Bill contains the draft legislation to implement the tax. It was open for public comment that was to be submitted by 31 March 2017.

It is expected that the proposed tax will be implemented later this year, once the legislation has been finalised.

 

 

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