Public Affairs Ireland | Training and Development | Conferences

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

  1. The official name for the new tax is the Sugar-Sweetened Drinks Tax (SSDT). It is effective from 1 May 2018.
  2. SSDT applies on the first supply in the State of sugar sweetened drinks. The supplier is liable to account for and pay the tax. The tax applies to water and juice based drinks which have added sugar and a total sugar content of five grams or more per 100 millilitres. Products liable to the tax may be in ready to consume or in concentrated form.
  3. The tax operates as an excise duty and is administered on a self-assessment basis. Suppliers are required to register with Revenue in advance of making first supplies of sugar sweetened drinks in the State. They must file returns within one month after the end of the accounting period during which the supplies were made.
  4. A relief from the tax is available where sugar sweetened drinks sourced in the State are supplied, on a commercial basis, outside the State. In order to claim this relief, “exporters” need to register with Revenue in advance of making supplies outside the State.

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
Obesity Policy and Action Plan 2016–2025

  1. Embed multi-sectoral actions on obesity prevention with the support of government departments and public sector agencies
  2. Regulate for a healthier environment
  3. Secure appropriate support from the commercial sector to play its part in obesity prevention
  4. Inform and empower change through a clear communications strategy
  5. Develop a service model for specialist care for children and adults
  6. Mobilise the health services with a focus on prevention
  7.  The Department of Health will provide leadership
  8. Acknowledge the key role of physical activity in the prevention of overweight and obesity
  9. Allocate resources according to need in particular for children and disadvantaged groups
  10. Monitor research and review

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.


[i] Listen to the show here.

[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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