Thursday 3 May 2018
Tom Ferris is a Consultant Economist specialising in Better Regulation. He lectures on a number of PAI courses and contributes blogs regularly to PAI. He was formerly the Department of Transport’s Senior Economist
A sugar tax has been introduced to help tackle growing levels of obesity in Ireland. Prof. Donal O’Shea, a consultant endocrinologist and Chairman of the Royal College of Physicians of Ireland Policy Group on Obesity welcomed the sugar tax on RTÉ Morning Ireland on 1 May. He said it was the first solid, concrete step the Government has taken to tackle the obesity epidemic. He pointed out that 20,000–40,000 people died from obesity-related conditions over the last ten years. However, speaking on the same programme, Prof. Mike Gibney, Emeritus Professor of Food and Health in UCD, pointed out that a significant salt reduction programme has been extremely successful in Ireland and that did not involve a taxation initiative. The salt reduction programme, running since 2004, has resulted in a massive reduction in salt in a number of foods, including bread and breakfast cereals.[i]
What is the Sugar Tax?
The tax will be applied to certain sugar sweetened drinks – see Box A. It has been designed to lower the consumption of high-sugar drinks and, in doing so, help to tackle the growing levels of obesity in Ireland. The official name of the new tax is the Sugar-Sweetened Drinks Tax (SSDT). While the main objective of the new tax is to help tackle obesity levels across society, it will also raise an estimated €40m revenue annually for the State.
Box A: How the Sugar Tax will be applied
Source: Revenue Commissioners’ Guidance, available here.
Delay in implementation
Budget 2017 announced that the new tax was to be introduced in April 2018. A public consultation process invited interested stakeholders to make submissions in relation to the design, scope and practical implementation issues of the tax. This process received 30 submissions, which are published on the Department of Finance website.[ii]
However, there was a delay in the introduction of the tax, until 1 May 2018, because approval had to be obtained from the European Commission to ensure that the new tax did not infringe EU State aid law. The sugar-sweetened drinks tax is the first of its kind to be reviewed by the European Commission and will provide a benchmark for State aid decisions in this area.
What will the tax yield?
The Department of Finance estimates that the sugar tax will yield in the region of €40m in a full year. In a background document, the Department admits that it was difficult to assess the exact yield from the tax as “the soft drinks industry continue to reformulate their products reducing sugar content”[iii].
The first indication of the actual amount the sugar tax will raise will come at the end of July, the deadline for suppliers to return their first two months of collected sugar tax.
Is taxation sufficient to reduce obesity?
A sugar tax, by itself, will not reduce obesity. The Department of Finance hopes that the tax will drive change in the products produced by the soft drinks industry. Specifically, it hopes that:
“… the introduction of a financial barrier on sugar sweetened drinks will result in reduced consumption by incentivising individuals to opt for healthier drinks in tandem with providing motivation for the soft drinks industry to reformulate by reducing added sugar content and delivering healthier products”.[iv]
Colm Jordan, Director of the Irish Beverage Council, was not so optimistic. He pointed out that:
“The Government’s Health Impact Assessment found no conclusive evidence a tax on sugar-sweetened drinks will impact population weight. Wherever a tax has been introduced it has failed to tackle obesity”.
He did however state that:
“Notwithstanding this, we have co-operated fully with the design and implementation of the tax.”[v]
Suite of Measures to tackle obesity
The Government is not relying on taxation alone to tackle the nation’s problem with obesity. It has published a wide-ranging plan called “A Healthy Weight for Ireland – Obesity Policy and Action Plan 2016 – 2025”[vi]. This plan reflects the Government’s desire to assist people to achieve better health and, in particular, to reduce the levels of those who are overweight and obese. It also acknowledges that the solutions are multiple, and that every sector has a role in reducing the burden of these conditions. Specifically, 10 steps for action have been identified – see Box B. These steps will chart a course for reversing the obesity trends, preventing complications associated with obesity such as diabetes, and reducing the overall burden for individuals, their families and the health system.
Box B: Ten Steps
Source: Department of Health, A Healthy Weight for Ireland: Obesity Policy and Action Plan 2016–2025, available here.
Some concluding remarks
The introduction of the Sugar-Sweetened Drinks Tax is only the start of a process. It could never be enough on its own in tackling obesity. Accordingly, there is a real need to see action under each of the steps listed in the Government’s Obesity Policy and Action Plan. However, it is surprising that the Minister for Finance failed to ring-fence the proceeds from the tax to fund other some public health initiatives. The UK did decide to ring-fence the yield from its own sugar tax. From 6 April 2018, millions of children across the UK will benefit from the government’s key milestone in tackling childhood obesity, as the Soft Drinks Industry Levy comes into effect.[vii] The UK levy which is expected to raise £240m each year will go towards doubling the Primary Sports Premium, the creation of a Healthy Pupils Capital Fund to help schools upgrade their sports facilities, and give children access to top quality PE equipment. The levy will also give a funding boost for healthy school breakfast clubs. The UK experience should certainly be looked at by our Minister for Finance.
[ii] View the submissions on Department of Finance website, here.
[iii] Sugar-Sweetened Drinks Tax, Information Note – Budget 2018, available here.
[iv] Ibid, available here.
[v] 76% of soft drinks not liable for new sugar tax”, Food and Drink Ireland Press Release, available here.
[vi] Full Plan available here.
[vii] UK Government Press Release, available here.
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