South Africa approves fizzy drinks tax from April next year
South Africa will introduce its new sugar tax on fizzy drinks from April next year in an effort to combat rising obesity rates in the country.
The bill providing for the implementation of a tax on sugary beverages – the health promotion levy – was passed by the National Assembly on Tuesday.
It followed hearings before Parliament’s finance and health committees as well as negotiations within the National Economic Development and Labour Council (Nedlac) on an implementation plan.
Drink will be taxed 2.1 cents for every gram of sugar over 4g in each 100ml, which will add just over 4 per cent to then price of cans of popular drinks and around 1.5 per cent to the cost of a two litre bottle.
If you use top selling Coca Cola as an example,which has 10.6g of sugar in each 100ml of drink, the new tax will add 45c to a typical 330ml can. Currently a can in South Africa costs around R10 while some retailers are selling packs of six for R53. A two litre bottle of Coca Cola currently costing R16 could increase by R2.7.
A single teaspoon of granulated sugar is 4 grams of sugar, so a typical 330ml can of fizzy, sugared drink has the equivalent of almost nine teaspoons… and 140 calories.
An interdepartmental committee consisting of the Treasury and the departments of economic development, agriculture, trade and industry and labour also worked on a mitigation strategy to limit the effects of the levy on sugary beverages.
A task team will monitor the implementation of the health promotion levy to assess its effect on job losses. It will also look at a range of government programmes to provide support to the industry.
Finance Minister Malusi Gigaba said there could be no trade-offs between health and economic growth. He stressed that a national effort was required to get growth off its current low growth path. Nothing could be sacrosanct in this effort and tax increases would also have to be considered.
Gigaba noted that SA’s fiscal position had become “more precarious” and a balance would have to be struck between raising taxes and economic growth.
The Treasury made significant concessions in the design of the health promotion levy during the course of the deliberations. In terms of the bill adopted by the National Assembly, the tax will be imposed at a rate of 2.1c/g of sugar beyond a threshold of 4g of sugar per 100ml.
The sugar industry opposed the levy on the grounds that it would contribute to the loss of jobs, but the Treasury and the Department of Health argued it was necessary to deal with obesity and the epidemic of noncommunicable diseases.
The levy is provided for in the Rates and Monetary Amounts and Amendment of Revenue Laws Bill, which was adopted despite DA opposition.
Other money bills – the Taxation Laws Amendment Bill and the Tax Administration Laws Amendment Bill – were also adopted by the National Assembly on Tuesday.
Source: Business Day