Introduction to Sugar Tax in the UK

Sugar tax is a tax implemented to reduce the high sugar levels in soft drinks. In case of sugar tax, Soft drink companies are taxed as per their high sugar content. It is implemented on 6Th April 2018. This action has been taken by UK govt. to reduce level of obesity and tooth decay problems which are growing day by day in small aged children’s. Soft drink companies now a days putting large amount of sugar in their soft drinks and selling them in large quantities in the market. Due to selling of soft drinks with high sugar content, children’s are buying it in large quantities due to its taste and facing health problems such as obesity, tooth decay, diabetes in small ages. We are currently consuming sugar 3 times more than what is recommended. This tax is implemented to curb the levels of sugar in soft drinks as well as to maintain the health of small children’s as they are the future of our country.

Also Read: Soft drink Industry levy

How Sugar Tax Works?

There are total 457 registered producers in UK. This tax is implemented on the manufacturers or producers of soft drink companies producing soft drinks with high sugar content. It’s up to them to decide that they want to pass this tax to the consumers or not.

The tax levied on the manufacturers are as follows –

1. Drinks with more than 8g of sugar content per 100 ml will face a tax rate of 24p per litre.
2. Drinks with 5-8g of sugar per 100ml will face a tax rate of 18p per litre which is quite low as compared to first point mentioned above.

This tax is directly paid by the manufacturers to HMRC. It was estimated that tax will reach £500 per annum but now it has been reduced to £240m as some of the manufacturers reduced the sugar content in their product.

Benefits Of Sugar Tax

1. The most important benefit of sugar tax is that it helps in reducing childhood obesity. Now days, children’s are becoming fatty in small ages due to consumption of soft drinks having high sugar content. This is a problem growing in UK day by day and producing drastic impact on the health of the small children’s in the form of obesity. Obesity in small children’s may give birth to many other problems too.
2. The second benefit of sugar tax is that it helps in collecting lots of revenue and this revenue is used in funding new sports facilities in schools, healthy breakfast etc.
3. It helps in providing better health to the small aged children’s.
4. Due to sugar tax, many soft drink manufacturers already lower the sugar content in their soft drinks and there is a hope that this will continue in the months & years to come.
5. It helps in providing good health to our children’s as they are the future of our country.
6. It helps in reducing the cases of tooth decay problem in hospitals.
7. It helps in preventing obesity problem in the small aged children’s.

Disadvantages Of Sugar Tax

1. As this tax is good for UK peoples and producing some good results as of now. I am not finding any big disadvantage to it. The only disadvantage is that due to sugar tax, some of the manufacturers increase the prices of their soft drinks and it becomes costly now. It means that the manufacturers are taking sugar tax from the consumers and submitting it to HMRC.

Products Exempted From Sugar Tax

Products which are exempted from sugar tax are as follows –

1. Fruit juice (They don’t carry added sugar)
2. Products with high milk content due to calcium ingredient.
3. Sugar free soft-drinks are also exempted from sugar tax. For ex – Diet coke, Coca cola zero etc.
4. As of now, other products such as cakes, biscuits and other foods are also not covered under the tax.

Role Of Public Health England(PHE)

1. PHE always warned adults & children above 11 years of age that they should not consume more than 30g of sugar per day which is equal to 5% of your total calories.
2. PHE warned that eating excessive sugar products are harmful and it leads to many diseases such as diabetes, heart attacks, liver failure, stroke, cancer etc.
3. PHE also said that according to World health organization (WHO), national child development study accounted for 72% of global deaths in 2016 and the main reasons behind these deaths are diabetes, heart attack, and stroke. Every year in UK, 73,000 peoples die from heart disease, 40,000 die from stroke and 3.7 million peoples are suffering from diabetes.
4. PHE planning for a 20% reduction in sugar content by 2020 and 5% being the target for the first year. However, new report says that food manufacturers and supermarkets only managed to cut 2% of the sugar content.
5. PHE also included chocolate and sweets in PHE programming aiming for 20% reduction by 2020. It also includes products sold in coffee shops and restaurants containing high level of sugar.
6. PHE also said that if food industry will not make enough progress in terms of sugar reduction, further measures will be taken to reduce it more.
7. PHE also hopes that sugar tax will help in improving the obesity and tooth decay problems of small aged children’s.
8. PHE also suggested peoples of UK to drink water & lower fat milks and skip the soft drinks altogether.
9. PHE also working on cutting sugar and calories from every day foods in coming future. For ex – Breakfast cereals, pizza, yogurts by 20%.

According to the latest survey, 90% of the UK public is supporting govt. in making food & drinks healthier.

Also Read: Tax Changes

Sugar Tax In Other Countries

1. Portugal & catalonia – Two-tiered tax on sugar drinks – 15C increase per bottle and it will rise to 30C, if exceeds the sugar content of 80g per litre.
2. USA – 6 Local jurisdictions put a tax on sugar drinks. For ex – Berkeley, California – 1 cent/OZ
3. Chile – In case of Chile, Sugar Drinks are taxed, if it exceeds the sugar content of 62.5g per litre @18%. If it is below 62.5g per litre, it will be charged at 10%.
4. Mexico, Finland & France – Mexico – 1 Peso per litre, France - £7.5 per 100 litre, Finland - £0.220 per litre (Mexico shows 12% reduction in the first year)
5. Hungary – In case of Hungary, Sugar tax is levied if sugar content exceeds 80g per litre at 7 HUF/litre (Hungary saw 40% reduction in sugar content)
6. Brunei & Thailand – In countries like brunei and Thailand, excise duty is levied on sugar drinks exceeding 60g of sugar content per litre.
7. UAE & Saudi Arabia – In UAE & Saudi Arabia, 50% tax is imposed on carbonated drinks.

Results

1. The price of soft drink bottles increases.
2. Leading brands like Fanta, Lecozade & Ribena reduce the sugar content from their drinks but Pepsi and Coca-cola does not.
3. People influencing and moving more towards pure fruit juices and high milk content drinks having calcium.
4. The maker of Im Bru (Popular Scottish drink) has stopped making the original full sugar version.
5. Reduction in cases of obesity and tooth decay problems to some extent.
6. Lots of revenue collected from the manufacturers of soft drinks which will be used in funding new sports facilities in schools, healthy breakfast etc.

About the author

Sumit Agarwal
Sumit Agarwal (ACMA ACA India), the Managing partner of dns accountants is a highly respected accountant with expertise in helping owner-managed businesses.