Government introduces sugar tax
The UK’s 2016 budget is a mixed bag. While the Chancellor George Osborne decided to freeze duty on beer, cider and whisky, he announced a tax on sugar-sweetened beverages during his speech on 16 March 2016. Under the plan, by 2018, sugary drinks will be taxed on the amount of sugar they contain, with some exemptions for fruit juice and milk.
Based on the government’s revenue targets, the levy for a standard 330 ml can will amount to between GBP 0.06 (USD 0.09) or GBP 0.08 (USD 0.12), depending on the sugar content.
The levy is expected to raise GBP 520 million (USD 747 million) in the first year, but will fall over time.
The tax is basically a “sin” tax, levied to both discourage and profit from an act purported to be harmful to society. Mr Osborne and some pro-sugar tax activists hope that it will help reduce obesity, especially in children. Therefore, some of the revenues are intended to go toward physical-activity programmes for children.
Media say that the tax might turn into a policy export. Along with sugary-soda taxes in Mexico, local soda-tax experiments in the United States, and soda and “fat” taxes elsewhere around the world, sugar taxes are something of a policy darling in the fight to get people to eat and live healthier, despite scant scientific evidence in support of this claim.
As could be expected, the soft drink industry was not amused as the tax will apply only to sugar-sweetened beverages and does not cover other food categories.
Industry associations argued they are “extremely disappointed,” calling the tax a “piece of political theatre” and “simply absurd”. Some manufacturers are threatening legal action over the measure.
Investors were not pleased with the sin tax either. Some even overreacted. The FTSE 100 company Tate and Lyle saw its share price drop after the sugar tax announcement ... despite not owning a sugar business anymore. In July 2010 Tate and Lyle announced the sale of its sugar refining business, including the rights to use the Tate & Lyle brand name, to American Sugar Refining. Eventually, investors noticed their error and within an hour the share price had climbed most of the way back up again.
