COPENHAGEN: In its policy paper on a proposed tax on sugar-sweetened beverages (SSBs), the Treasury outlines how taxing soft drinks is the cheapest way the government can tackle diet, physical activity and obesity. It does not, however, consider the effectiveness of such a tax or take into account the many hidden economic costs in introducing it.
Treasury says trying to reduce obesity through a tax on SSBs is according to its calculations the cheapest option at 20c per head, while using food-advertising regulations would cost 90c/person; food labelling R2.50/person; worksite interventions R2.50/person; mass media campaigns R7.50/person; school-based interventions R11.10/person, and physician counselling R11.80/person.
In other words, it is much easier to tax cans of soda than actually address obesity as a lifestyle disease – even though the effects of such a tax on consumers’ purchasing behaviour in South Africa remain at best uncertain. What the Treasury seems not to have considered in its calculations is the potential negative impact of the proposed tax on the beverage industry and the national economy.
The R80 billion industry supports 200 000 livelihoods, many of these in poorer provinces, such as the Eastern Cape. If the tax goes ahead, up to 70 000 jobs could be lost, according to an independent study by Oxford Economics commissioned by the Beverages Association of SA (Bevsa).
Provinces such as the Eastern Cape will be disproportionately affected in terms of the number of jobs lost, where the bottling industry supports the livelihoods of thousands of workers, spaza shop owners and their families.
With volumes reduced by potentially a third, the knock-on effects across the supply chain will be felt from the Limpopo to Cape Town. The proposed tax has also put brakes on future investment in the sector.
Treasury acknowledges that some of the challenges that have faced the imposition of a tax on sugar products include administrative considerations; job losses; product substitution by consumers; and tax evasion because of classification anomalies. Taxing unhealthy lifestyle choices for some products may have worked in the past, but taxing sugar is far more complex.
Sugar is present in so many foods and drinks today – in its naturally occurring nutrient, for example in fruit, as well as in its refined form, but pushing for a tax that distinguishes between the two can be artificial since many products are a combination of the two.
