Cape Town – A tax on sugar-sweetened beverages (SSBs) is a smart instrument to reduce consumption, said Evan Blecher, from the University of Cape Town’s Economics of Tobacco Control Products.
Blecher was one of a number of stakeholders who made a representation to Parliament’s standing committee on finance on Tuesday during a second round of public hearings on National Treasury’s proposed tax on SSBs.
READ: #SugarTax debate in Parliament: as it happened
Blecher used the tax levied on tobacco and alcohol as an example of how tax increases that result in price hikes eventually lead to lower consumption.
Beer, according to Blecher, was taxed based on its alcohol content that led to people moving to lighter beers, while breweries started promoting beer with a lower alcohol content.
This, he said, resulted in 12% decrease in alcohol consumption.
In his submission to Parliament, Blecher said there has been a significant discussion about the type of tax that is suitable for SSBs, such as a flat tax (as is the case with tobacco), a dose tax (as is proposed by National Treasury) ora threshold tax (which the UK is proposing).
National Treasury proposes that a tax be levied at the rate of 2.29c for every gram of sugar (both added and natural) found in Coca Cola and other soft drinks.
READ: Proposed sugar tax no silver bullet for rising obesity
Blecher argued that a dose tax is the preferable instrument, as it allows the industry and consumers to respond to the tax levied instead of government making the choice on their behalf.
“This means that the higher the tax rate is per gram of sugar, the greater the incentive will be on the supply side (the beverages industry) to make changes to the formulation.”
This, according to Blecher, will minimise the negative effect that a tax on SSBs will have on employment. Although the volumes of sugar-sweetened beverages may decline there may be no decline in beverage consumption.
He also emphasised that a tax on sugar-sweetened beverages is unlikely to be a significant revenue generator and that the beverages industry could very well soften the effect of such a tax through reformulation of their products. Read Fin24's top stories trending on Twitter: