UK soda tax goes into effect

The United Kingdom implemented its tax on sugar-sweetened beverages on April 6, two years after originally announcing the levy. Introduced by George Osborne, the UK’s chancellor of the exchequer as part of the 2016 budget, the tax affects any drinks—except for milk-based drinks and fruit juices—with a total sugar content above 5 g per 100 mL and a higher rate for drinks with more than 8 g.

The government set the effective date for April 2018 to give the industry time to adjust and change their formulas to reduce the amount of sugar in their drinks. And that’s just what many beverage companies did. Coca-Cola has reformulated most of its fizzy drinks to ensure nearly all of them will avoid the levy. Fanta, for instance, had 10 g of sugar per 100 mL a few years ago but now falls under the 5-g level. Nestlé has slashed the sugar in San Pellegrinosodas by 40% in the United Kingdom.

The reduction has been so dramatic that the British Treasury has cut its revenue forecast for the levy almost in half to reflect the shrinking number of soft drinks with a taxable amount of sweetener. Originally, the government expected the tax to bring in £520 million in the first year. Now, the UK Office for Budget Responsibility (OBR) estimates the tax will raise £240 million a year on average.

“In Budget 2016, the government presented the levy as being hypothecated to ‘pay for school sport,’ but the receipts shortfall has not led to changes in the associated spending commitments,” writes the OBR in its “Economic and Fiscal Outlook” report published last month. The UK Treasury said it was good news that manufacturers were cutting their sugar content. “This levy is about changing behavior. It’s about making people healthier overall. It’s really positive that the industry has recognized this and engaged so much on this,” said a spokesperson for the Treasury.

New research from Mintel shows that just under half (47%) of British consumers say that a tax making unhealthy food/drink more expensive would encourage them to cut down on these items. Those aged 16–34 (53%) are considerably more likely to be deterred by a tax than those aged 45 and over (42%). Meanwhile, by region, Londoners (53%) are most likely to be deterred by a tax; this compares to less than four in 10 (38%) consumers living in Scotland.

The day before the levy went into effect, the British Soft Drinks Association issued a press release stating that there is no evidence to suggest a tax will reduce obesity. “Current data illustrates that a tax of this sort on a single category will not have a meaningful impact on obesity levels,” writes the association. “Sugar intake from soft drinks has been declining year-on-year since 2013 yet figures from the NHS state that obesity prevalence increased from 15% in 1993 to 27% in 2015. Also, latest figures from NHS Digital show that hospital admissions where obesity is a factor has more than doubled in England during the last four years.”

Economic and Fiscal Outlook report

Mintel press release