Sugar Tax proposal must first pass a number of tests – Wilmot James

DA concerned that proposed taxation could pose a threat to the survival of small businesses and spaza shops

DA submits comments on proposed Sugar Tax

23 August 2016

The DA has made its submissions on the proposed Taxation of Sugar-Sweetened Beverages (SSBs), which was gazetted by National Treasury for public feedback on 8 July. 

The DA, in its submissions, contends that Treasury’s proposals must first pass a number of tests, before justifying itself that a blunt instrument such as taxation is the most effective way to achieve alleged public health goals. 

If the purpose of the tax is simply to raise more revenue under the fig leaf of a public health benefit, it lacks moral force and should be rejected out of hand. But if the tax is clearly structured to fund medical research on obesity, diabetes, hypertension and social habits that result in an increase in body mass index (BMI), its purpose would be more defensible. 

Treasury estimates that “Sugar Tax” could add about R11 billion to the Fiscus. A meaningful portion of this revenue should be ring-fenced for medical research. 

The DA is concerned that “Sugar Tax” will destroy jobs. The current unemployment crisis is well-known, and any measure that eradicates jobs further must be resisted. 

There is also concern that the proposed taxation could pose a threat to the survival of small businesses and spaza shops, as revenue from sweetened drinks represents a large percentage of their revenue. 

The DA proposes that the taxation is structured to encourage product innovation. This would entail a graduated tax on manufacturers that would prompt companies to innovate and develop their product range to include drinks that fall under a proposed sugar threshold that attract no additional taxes. 

Consideration should also be given to direct tax proceeds towards assisting schools to promote exercise and expanding the range of nutritious food and drink offerings at tuck shops. 

We should not treat the beverage industry as an enemy of change. Businesses are capable of extraordinary innovation if the incentive architecture is right. The role of government in regulating the eating and drinking habits of individuals must always be balanced with the exercise of the individual’s choice. 

Issued by Wilmot James, DA Shadow Minister of Health, 23 August 2016