The proposed tax on sugary drinks is likely to be introduced in April 2018, although there is still disagreement on the exact level of tax.
Business and labour want a watered down tax to be phased in over three years, but Treasury wants to implement its current proposal of approximately 10 percent on a can of Coca Cola, and increase this over time.
This emerged at a joint meeting of Parliament’s health and finance committees to get a reportback from the National Economic Development and Labour Council (Nedlac) on tax negotiations between government, business and labour.
Treasury proposed the tax two years ago in an attempt to halt diseases linked to obesity, which are fueled by sugary drinks.
Cost of obesity
Non-communicable diseases (NCDs) cost the country almost 7 percent of GDP in 2015 due to early retirement and absenteeism, while 2000 people had limbs amputated because of diabetes in 2009, according to Treasury’s Aparna Kollipara.
Initially, Treasury proposed a 20 percent tax but this year it offered a compromise – exempting the first 4g of sugar per 100ml from the tax – to encourage industry to reduce sugar in its products. Thereafter, it wants to tax every gram of sugar above 4g at a 2,1cents.
Cosatu’s Matthew Parks reported that Nedlac had reached an agreement based on higher exemptions of sugar content phased in over three years – an exemption of 6,5g of sugar per 100ml in 2018, a 5g exemption in 2019 and 4g exemption in 2020.
“This has been one of the most extensive public consultations on a Bill,” said Parks. “We don’t want to collapse government’s health initiatives. Not a single Cosatu member does not have a family with diabetes, cancer and so on. But we are talking of unemployment of 36 to 38 percent. We are concerned with job losses.”
All parties accept that the tax – already delayed by a year to allow the negotiations – will be implemented in April next year.
Beverage SA’s general manager, Tshepo Marumule, said that his organisation had undertaken to reduce imports in its products to mitigate against job losses, specifically using locally produced phospates and local companies to produce the bottle wrap-arounds that are currently imported.
“We also support biofuel and our trucks will use bio-ethanol [from sugar] in time,” said Marumule.
However, Treasury warns that the low rate of taxation might not get people to drink fewer sugary drinks.
“There is legitimate criticism from the health sector that we need to double or triple the tax to really hit people in the pocket,” said Treasury Deputy Director General Ismail Momoniat.
“This is a low threshold, but it is an important signal that we are dead serious about the issue of obesity. We are starting low but if this is not good enough, we will increase the tax until we get the result we need.” – Health-e News.
An edited version of this story was also published by eNCA