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Reaction - the sugar tax levy not so sweet for consumers

6 April 2018
Today (6 April 2018), the Government has introduced the long awaited Soft Drinks Industry Levy (the ‘sugar tax’) to consumers and the drinks industry after it was first proposed in the 2016 Budget.

The levy is aimed at manufacturers and importers of soft drinks which contain added sugar and will be implemented through a tax band system. Drinks with less than five per cent added sugar will be below the threshold and will not be taxed, drinks with 5-8 per cent added sugar will be taxed at 18p per litre and drinks with more than eight per cent added sugar will be taxed at 24p per litre. There will be exemptions for pure fruit juice drinks (which do not contain added sugar), milk-based products (provided that they contain at least 75 per cent milk) and small businesses.

The Government hopes that the levy will encourage manufacturers to reformulate high sugar content drinks and to broaden their offering to include a wider variety of no and low sugar alternatives. Also, should manufacturers and importers choose to pass the cost of the levy on to the consumer (as with the alcohol and tobacco levies) it will create a price differential which may encourage consumers to choose the no or low sugar alternatives.

Vicky Gaskell, a corporate food & drink lawyer at national firm Browne Jacobson LLP, commented on the levy:

“In the period since the levy was first proposed, manufacturers have been steadily reformulating their products - some of which have managed to cut sugar by up to 50 per cent. This has been so successful that forecasts as to how much the levy will generate in the first year have decreased from £520 million to £385 million. However, a key concern for manufacturers is ensuring that the product taste remains unaffected and some producers have suggested passing the cost of the levy on to the consumer. Whilst manufacturers deliberate over which option to adopt, one thing for sure is that the Government will be keeping a close eye on the effectiveness of the levy as it considers future tactics for its battle on sugar, salt and unhealthy eating habits.”

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