UK government backtracks on bid to levy sugar tax on unsold goods

From:FoodBev

The UK government has said that it will amend its planned sugar tax to ensure that manufacturers are not struck with surcharges for product that doesn’t reach retail shelves.

The move is aimed to address concerns regarding spillage or quarantined soft drinks in cases where the product or packaging does not meet quality standards, or where the manufacturer produces a greater volume than it sells.

The duty point will be moved from the point of bottling to the factory gate, ensuring that the levy will only become payable once the products have left the production facility. The change, HMRC said, would provide room for unavoidable waste in the manufacturing process.

It is one of a small number of changes and clarifications to the government’s draft legislation, following a consultation with retailers, trade associations and manufacturers – including the likes of Coca-Cola, Pepsi and Lucozade Ribena Suntory.

Despite the rethink, the impetus of the levy will remain on the packager, with the government saying that ‘this is where the production volumes are most easily recorded and reported’.

In the case of imported soft drinks, the company to first receive the goods in the UK will be liable to pay the tax. This will help ‘address concerns about disaggregation of imports’, it said.

Alcoholic drinks included

The government also said that it would bring forward legislation to include all alcoholic beverages with an ABV of up to 1.2% within the scope of the sugar tax, after critics argued that the legislation would be too lenient on pre-mixed alcoholic drinks and so-called ‘alcopops’ – ready-to-drink flavoured alcohol, generally with a relatively low alcohol content and an image similar to that of soft drinks.

Alcoholic drinks that are designed to offer consumers greater choice or healthier alternatives, such as low-strength beer and wine, will not be included in the plan.

And it was confirmed that milk-based beverages with at least 75% milk or yogurt, as well as dairy alternatives like plant milks, would be excluded from the sugar tax, as was stated when the levy was first put forward.

“It is the case,” the government argued, “that one in five teenage girls do not get enough calcium in their diet, and milk remains an important part of the Eat Well plate. The government continues to be of the view that the nutritional properties of milk justify a different approach to milk-based drinks in the levy.”

The sugar tax was first announced by then-chancellor George Osborne as part of the budget statement in March. Following its initial consultation, the government will hold a further eight-week technical consultation period, and confirmed that it still expects to include the finalised levy rates in its 2017 budget.

The sugar tax will then come into force as planned in April 2018.

The government reiterated its figure of £520 million, which is expected to be raised by the imposition of the tax.

There will be two bands – one for sugar content above 5g/100ml and a second higher band for sugar content above 8g/100ml. It will only be applied to water-based soft drinks, meaning that milk-based beverages and pure fruit juices are exempt.

On the basis of the government’s revenue target for the levy, it accounts to a rate of £0.18 or £0.24 per litre unit charge according to sugar content – expected to be passed entirely onto the consumer. The budget’s policy costings statement claimed that the tax would add around a quarter of a percentage point to CPI and RPI inflation rates in 2018-19.

If the cost of the levy to manufacturers was applied like-for-like to the retail price of a 500ml bottle of Coca-Cola, the price would rise from around £1.25 to £1.37, depending on the retailer.

The government also predicts revenue from the tax to fall in the next couple of years, as consumption drops off.

The move will ‘help tackle childhood obesity by incentivising companies to reduce the sugar in the drinks they sell’, Osborne told MPs in March. “Sugar consumption is a major factor in childhood obesity, and sugar-sweetened soft drinks are now the single biggest source of dietary sugar for children and teenagers,” the government said.

This remained a central part of the current government’s decision not to shift the focus of the tax away from packagers and onto consumers, saying that, by applying the levy to the point of sale, the incentive for manufacturers to reformulate their products would no longer be present.

The Treasury wants producers to cut the amount of sugar in their drinks so that they fall below the tax threshold.

And despite finding favour with health groups, the tax has not been met with universal approval.

British Soft Drinks Association director general Gavin Partington said: “There is no evidence worldwide that taxes of this sort reduce obesity, and it is ironic that soft drinks are being singled out for tax when we’ve led the way in reducing sugar intake, down over 17% since 2012.

“We’re also the only category to have set a 20% calorie reduction target for 2020.”

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