Why South Africa needs a sugar tax

Heart disease. Cancer. Type 2 diabetes. These are all common diseases linked with the high consumption of sugar and many governments are turning to tax to help cut the sweet and promote healthier lifestyles.

In South Africa, the institution of a sugar tax is an idea that needs to be taken far more seriously as sugar-related illnesses continue to rise, impacting the economy and the tax base.

Mexico implemented a soft drink tax in 2013, Norway has had an excise tax on refined sugar products for a while, and in the United Kingdom, George Freeman, the life sciences minister, as well as well-known chef Jamie Oliver, openly backed a sugar tax earlier this year.

“A recent study has presented interesting data with South Africa at the second highest ranking, ahead of the USA, with regards to the number of deaths attributed to sugar,” said Ettiene Retief, chairperson of the National Tax and SARS Stakeholders Committee at The South African Institute of Professional Accountants (SAIPA).

“In 2014 a sugar tax was proposed, but not implemented. Will a sugar tax work here? Perhaps the most important question is – can we really afford not to take it seriously and make sure it is implemented?”

A sweet solution

The introduction of a one peso per litre tax on soda and other sugary drinks by the Mexican government has had some interesting results. While it is still early on in the process, their findings have shown that in 2014 the purchase of soda and other similarly taxed drinks had dropped by 10% compared with the same period the previous year.  In addition, the purchase of bottled water rose by 13%, showing that people were substituting the unhealthy with the healthy.

“Traditionally we have thought of sin taxes as not having any significant kind of impact on changing people’s behaviours and habits,” said Retief.

“Empirical evidence suggests that people won’t stop smoking because of a tax, but will stop or reduce consumption due to health risks or when they have decided it’s time to stop. When you’re at a social event, you don’t think about the increased sin tax. However, sugar taxation in other countries has shown positive results and this could potentially transform many issues prevalent in South Africa.”

Sugar is seen as far more socially acceptable than cigarettes. There is no stigma associated with it and it is easily available to anyone, regardless of wealth or station. However, it is conclusively linked to health issues that have a knock-on effect when it comes to working, medical aid, healthcare and the economy. Government’s plans for national health care is hindered by the high costs, and the high incidents of sugar related illnesses has a direct impact on those costs.

“The diseases caused by the over consumption of sugar have a massive economic impact,” said Retief. “Parents can’t work for as long or care for their families, children fall ill quicker and this impacts economic growth. It is a vicious circle, but is it one that can possibly be broken by taxation and consumer awareness?”

A foolish mistake

“We cannot compare traditional sin taxes with the sugar tax,” said Retief. “We can’t simply apply a sugar tax to make the high-sugar products more expensive, we need to also focus on consumer awareness and the comparative pricing of alternatives, and the sugar taxes collected should be used to fund aggressive education campaigns on healthier alternatives.”

Marketing, advertising and packaging practices could be regulated, with an introduction of warnings about the levels of sugar in certain foods and drinks, and the health risks, similar to the warnings on tobacco products. In the United Kingdom, the traffic light food rating system clearly shows exactly how much sugar is in any given item and allows for the consumer to make an informed choice on purchase.

A system like this would be enormously beneficial in South Africa where levels of education impact on understanding around how sugar can damage health and well-being. It will also ensure that the taxpayer of today is around to pay their taxes and boost the economy of tomorrow.

“The future workforce is under threat of serious illnesses due to the overconsumption of sugar,” said Retief.

“SAIPA is worried about the economy as a whole and the health of the tax base. The impact on companies thanks to increasingly high levels of illness, the taxpayer spend on healthcare instead of other areas means limited economic growth and then there are the concerns around how long a workforce can be economically active.  Now is the time to implement robust change and a sugar tax is the right way to go, as long as it is done well.”

This article was published on SAIPA

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Why South Africa needs a sugar tax