Sweet surprise for Treasury as sugar tax puts more than expected in the pot

01 November 2018 | Economic factors

Treasury collected a bit more than R1bn in sugar tax revenue between April 1 and August 31, and had expected to collect R1.64bn during the entire 2018-2019 fiscal year to March 31

The Treasury has generated more money than it anticipated from its new tax on sugary drinks, despite moves by some manufacturers to reformulate products to reduce their sugar content.

The government introduced a tax on sugar-sweetened beverages on April 1, as part of its efforts to combat obesity and its related health risks. The Treasury calls it the health promotion levy, and it has been set at 2.1c for every gram of sugar per 100ml above a 4g threshold: in other words, the first 4g of sugar per 100ml are exempt from the levy.

The Treasury said it had collected a little more than R1bn in revenue from the sugar tax between April 1 and the end of August, slightly ahead of its projections. It had anticipated collecting R1.64bn during the entire 2018-2019 fiscal year, which ends on March 31.

The Treasury’s chief director for economics and tax analysis, Christopher Axelson, said there could be several explanations for the higher-than-expected revenue. “Either the surveys we used to make the calculations underestimated the consumption of sugary beverages, or producers have not reformulated as much as we thought, or consumers have not decreased their consumption of sugary beverages as much as we estimated,” he said.

The Healthy Living Alliance’s executive director, Sibongile Nkosi, said researchers at Wits were currently evaluating the levy. “We are seeing a lot of re-formulation and new sizes, but we are not sure if industry is absorbing the tax or putting up prices,” she said.

The Beverage Association of SA (BevSA), said it was too soon to gauge the effect of the levy and that it planned to commission a study to determine its effects.

“BevSA has also run an education campaign to encourage healthy consumption of beverages, proper nutrition and exercise as part of a healthy lifestyle with the aim of reducing obesity and noncommunicable diseases in SA,” said BevSA’s GM for corporate services, Mpho Thothela.