Finance Minister, Pravin Gordhan, announced in February 2016 that a sugar tax would be levied with effect from 1 April 2017. The National Treasury has now published a policy paper which includes proposals on the taxation of sugar- sweetened beverages (SSBs).
The public have until 22nd August 2016 to respond in writing to the proposals.
The taxation of SSB’s is aimed at reducing excessive sugar intake in South Africa.
Recommendations of the policy paper include:
- A tax on sugar sweetened beverages based on sugar content will be implemented. This approach takes the view that SSBs have high sugar content but no nutritional value and therefore every gram of – sugar in SSBs should be taxed.
- Using the current available price and sugar content of soft drinks as a reference point, the estimated tax would be in the region of R2.29 per litre of SSBs (2.29 cents per gram of sugar).
- For SSBs that do not apply nutritional labelling, it is proposed that a relatively higher fixed gram of added (free) sugar is assumed. It is hoped that this will prompt producers to move towards voluntary labelling of products.
- 100% fruit juice and unsweetened milk and milk products will be exempted.
The tax / levy on SSBs will be implemented through the Customs and Excise Act (Act 91 of 1964). An additional Schedule or parts to one of the current Schedules will be added. The SSB tax / levy will be collected at the factory gates or at the ports of entry.
The proposed tax comes against the backdrop of a growing global concern regarding obesity stemming from overconsumption of sugar. The problem of obesity has grown over the past 30 years in South Africa resulting in the country being ranked the most obese country in sub-Saharan Africa.
Countries such as Finland, France, Hungary, Ireland, Mexico, Mauritius and Norway have all levied taxes on SSBs whereas other countries such the United Kingdom, Thailand and Australia have recently announced their intention to introduce such taxes as part of a package of measures to help deal with the excessive intake of added sugars.
This article is a general information sheet and should not be used or relied upon as professional advice. No liability can be accepted for any errors or omissions nor for any loss or damage arising from reliance upon any information herein. Always contact your financial adviser for specific and detailed advice. Errors and omissions excepted (E&OE)