With the possibility of a sugar tax being introduced in this jurisdiction as part of Budget 2017, Ireland has become yet another battleground in the war between industry and public health advocates over the price of a soft drink, and the effect that this can have on our health and the economy.
In a pre-budget submission entitled “Sugar Tax: All Cost, No Benefit”, the Irish Beverage Council (“the IBC”) has claimed that a proposed new tax on sugar-sweetened drinks could result in a loss of approximately €60 million euro per annum in sales to competitors based in Northern Ireland, where a proposed sugar tax is not due until 2018. The IBC also estimates a corresponding loss to the exchequer of approximately €35 million euro in lost VAT revenue per year.
The IBC position is summarised in the report as follows:
“Taxation is a blunt instrument and is an inappropriate model to effectively deal with concerns on obesity in Ireland. As it cannot realistically be expected to reduce consumption of soft drinks, it will prove ineffective as a public health measure while harming the economy.”
A proposed tax on sugar-sweetened drinks was listed as one of a number of measures to be considered as part of a strategy to reduce personal tax rates under the Programme for a Partnership Government published in May of this year.
Although a Department of Finance spokesman has confirmed that the possibility of introducing such a measure had been included in pre-budget tax strategy papers, it remains unclear whether a sugar tax is being introduced in this jurisdiction, and if so, when. Moreover, the objective of the tax as a revenue-raising measure and/or a health levy with a related strategy has not been set out.
The Irish Heart Foundation has released the following statement in response to the IBC report:
“We are not surprised by the views expressed by the Irish Beverage Council but it continues to be disappointing to hear when we are facing significant obesity and food poverty problems among our children that are not going to go away if we continue to rely on voluntary codes adopted by industry.
Right now we live in a country where obesity among children aged 8-12 years old has risen two-to-four fold since 1990 and it has to stop. Sugar sweetened drinks are the most consumed beverage in Ireland. These drinks, with no nutritional value, are being consumed by 53% of four-year-olds and 75% of 5 to 18 year olds.
Not only will such a levy drive a reduction in consumption of these high sugar products, it will also provide funding for vital health and nutrition programmes specifically targeting children and young people through a dedicated Children’s Future Health Fund.”
The question of whether or not these taxes are actually effective (at raising revenue or reducing the rates of non-communicable diseases such as diabetes and obesity) remains contested. Detractors point to a Danish ‘fat tax’ and a Finnish tax on sweets and ice cream which were ultimately withdrawn. Proponents argue the Mexican and French experience.
Although there is a preponderance of evidence to suggest that food taxes can operate to decrease consumption of ‘unhealthy’ foods, the evidence to support a positive health effect as a result of this decreased consumption is less convincing – some studies predict a corresponding drop in the prevalence of various non-communicable diseases, while others predict that targeted food taxes result in an adverse substitution effect i.e. consumers can easily switch to other high-calorie products when the price of one product or category of products rises due to added tax. Critics also point to the regressive nature of these so called ‘sin taxes’ in that they tend to result in a disproportionate negative impact on low-income consumers, be it in the form of reduced household incomes or lost jobs.
Despite a lack of clarity on the mechanisms by which food taxes affect public health, promoting healthy food consumption through fiscal policies is now part of the WHO European Strategy for the Prevention and Control of Non-communicable Diseases 2012-2016 and Global Action Plan for the Prevention and Control of Non-communicable Diseases 2013–2020. On the ground, Chile has introduced taxes similar to those in Mexico in January of last year with Barbados and Dominica following suit in June and September respectively. Closer to home, the drinks industry successfully persuaded the Slovenian government to withdraw proposals for a 10% tax on sweetened drinks in 2014, notwithstanding pre-existing regimes in Hungary and France.
Meanwhile, although the government’s position in respect of a sugar tax in this jurisdiction remains unclear, lobbying on the part of industry and public health advocates will likely continue to intensify up until the day of Budget 2017.