Sugar Tax Could Herald Further Food Taxes

Many health enthusiasts have welcomed the new sugar tax on drinks, but it could be the forerunner of further food taxes, according to accountant Old Mill.

Introduced by the Chancellor in the Budget, the 'soft drinks industry levy’ will be paid by producers of soft drinks that have added sugar. However, given that there are promised exemptions for smaller producers and it won't come into effect until 2018, it would appear to be little more than a gesture, says Mark Shelton, food and drink consultant at Old Mill.

Mark Shelton, food and drink consultant at Old Mill

Mark Shelton, food and drink consultant at Old Mill

It is also unlikely to have much impact on consumer habits. “Soft drinks already have a huge price variation depending on where they are purchased. The price in a supermarket is far less than a corner shop, an event, café, or motorway services, so this extra cost is unlikely to act as a deterrent to consumers,” he says. “There are also plenty of directly comparable low sugar or sugar free products available which do not appear to have had any effect on changing purchasing patterns.”

Perhaps the more important question is: Is this just the start? “There are concerns that this may be the first step by the Government towards further taxation on sugary food and drinks, following a similar trend to tobacco and alcohol taxes,” says Mr Shelton.

The new tax will be levied at one rate for drinks with 5 grams of added sugar per 100ml and a higher rate for drinks with 8 grams per 100ml.

Fortunately, there are likely to be tax exemptions for smaller producers, so regional manufacturers are generally unconcerned about its impact, he adds. “The money generated will supposedly fund work to tackle childhood obesity; if this is the case, then there are plenty of other foods containing high levels of sugar that the Government might look to target next,” warns Mr Shelton.

“But in an industry already flooded with sugar-free alternatives, there are questions about whether the tax will make any difference to consumer habits at all.”

Old Mill

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