Sugar to leave economy ‘sour’

SOUTH Africa is the first African country to adopt a sugar tax and follows the lead of countries ,Picture : Getty Images

SOUTH Africa is the first African country to adopt a sugar tax and follows the lead of countries including Portugal, Mexico, Thailand and Saudi Arabia.

The proposed sugar tax is sweet and sour, tax experts say. The proposal to tax the sugar content of beverages first came to light in the 2016 budget. After 18 months of debate, Parliament adopted the tax on sugary beverages, which is expected to commence on April 1.

Joon Chong, partner and Wesley Grimm, candidate attorney at Webber Wentzel said simply stated, a sugar tax of 2.1 cents a gram of sugar will be levied on all sweetened beverages, with the first 4g per 100ml being exempt. Practically, she said, this means that the price of your preferred sugary beverage will increase by about 11%.

The South African Sugar Association (Sasa) has stated that 3 129 jobs are immediately in jeopardy as a result of the Sugar Tax with small-scale growers likely to go out of production first. Moreover, Sasa predicts that 20000 direct jobs in coastal production regions could be shed in the next five to seven years as a result of the Sugar Tax. This is undesirable in a country where the unemployment rate is at 27.7%, a 13-year high.

Given that tax revenue, as described in the medium term budget policy statements, is projected to fall short of the 2017 budget estimate by R50.8bn and that President Jacob Zuma recently tasked the Minister of Finance and Presidential Fiscal Committee to find ways to add R15bn to the nation’s revenue, it may be inaccurate to state that the primary reason for imposing the Sugar Tax is to curb the spread of noncommunicable diseases, such as diabetes, Chang says.

As SA lacks a meaningful duty on imported sugar, the Sugar Tax may leave a sour economic after-taste rather than result in a healthier population.

The South African Revenue Service (SARS) last week announced they will collect the Sugary Beverages Levy (SBL) as from April. The Customs and Excise Act provides for a health promotion levy on sugary beverages which have been manufactured in or imported into SA. Imported products will be taxed when they are cleared for home consumption and locally manufactured products will be taxed at source.

SBL returns and payments can be submitted electronically through SARS eFiling and will also be accepted at Customs and Excise branches. Licencing and registration of manufacturers of sugary beverages will take place from February. Only commercial manufacturers that produce sugary beverages with a total annual sugar content in excess of 500kg a year need to be licensed and pay the SBL. Non-commercial producers below this threshold will be expected to register but will not be subject to the SBL.

The levy is fixed at 2.1 cents a gram of the sugar content that exceeds 4g per 100ml, which means the first 4g per 100ml are levy free. The levy is part of the government’s programme to prevent and control non-communicable diseases and assist in the prevention and control of obesity.

The SARS said that it would engage industry stakeholders during road shows to guide them through the process. Dates for the road shows will be published on the website next month.