The age of the soda tax: Moves in Asia-Pacific

By RJ Whitehead

- Last updated on GMT

© iStock
© iStock

Related tags: sugar tax, Tax, Soft drink

Debate over sugar taxes hit the limelight last year, with the controversial topic grabbing headlines around the globe.  

The UK, for example, has pledged it will introduce a soft drinks industry levy; a set of US cities including San Francisco and Philadelphia have made similar moves; and South Africa has published its proposals. 

Down Under, debate has been re-ignited in Australia and New Zealand, discussions that look set to continue into 2017. India is exploring incorporating a levy into GST, and there’s a possibility that Indonesia will revert to a past failed experiment with soda taxes.

But why did sugar taxes hit the headlines in 2016, and why are these Asia-Pacific countries considering such policies? We take a look at some of the countries where sugar taxes have caused the biggest stir in the region.

New Zealand

Debate over a potential sugar tax has been raging in New Zealand in the last year, with doctors calling for a 20% tax on sugary drinks. Wellington has taken a pragmatic line, saying there is no evidence that such a levy would work, and instead will focus on a health policy that concentrates on awareness and exercise. The Taxpayer Alliance, meanwhile, has labeled those pushing for a sugar tax as “post-truth virtue signallers”, and there appears to be little public support for such a move.

New-Zealand_medium

Still, medics recently redoubled their efforts to push the government towards their way of thinking, with the NZ Medical Association now claiming it has enough evidence that a sugar tax would help reduce obesity, diabetes and tooth decay. Dentists have called for labeling laws to outline a drink’s sugar content in teaspoons. Expect the debate to heat up further over the next 12 months.

Australia

Australians appear lesss enthused by the idea of a tax on sugary drinks than their trans-Tasman neighbors, though pro-levy pressure groups and think tanks have increased their activity in the closing months of 2016. The Grattan Institute has recommended a A$0.40 (US$0.30) tax per 100g of sugar, which it believes will cut soft-drink consumption by 15% and raise A$500m (US$376m) a year for Canberra’s coffers.

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Yet there is little support for such a move in government, with deputy prime minister Barnaby Joyce describing a sugar tax as "bonkers mad" and a "moralistic tax" that would have a huge impact on sugar farmers in the north of Australia. The Greens party has drafted legislation for a sugar-sweetened beverages tax ahead of a private senators bill to be heard before the end of next year.

Philippines 

A proposal in the Philippines to impose a tax of PHP10 (US$0.20) per liter on soft drinks—to be increased by 4% each subsequent year—cleared a House of Representatives committee in November but still has some distance to go before its passage. This is three times as much as the Mexican tax and would upset the growing market potential of the soft-drinks industry, analysts say.

However, President Duterte’s administration has strongly backed the bill, which the finance ministry believes could be worth PHP10.5bn (US$211m) to public funds. This has come to the dismay of industry players such as Universal Robina Corp and Del Monte Philippines, which have already expanded their portfolios of low-calorie drinks.

Indonesia

The Southeast Asian giant has past experience of a sugar tax, which it implemented then scrapped over a decade ago due after it was found to have crippled beverage manufacturers. Sales of sweetened drinks in Indonesia have averaged double-digit annual growth since the tax was lifted in 2004 to reach revenues of US$6bn last year—though analysts believe this is a fraction of the true market potential. Sugar intake remains below global and regional levels but is rising fast.

Finance officials this year asked the health ministry to study whether sugary drinks, including Indonesia’s most popular bottled drink after water, tea, constitute a health threat. There is little evidence that taxing the segment alone would have an impact on the health of famously sweet-toothed Indonesians, who take much more sugar from the food they eat than the packaged beverages they buy.

India

The debate in India doesn’t concern a soda tax as such, but the place of “aerated beverages” in the country’s anticipated GST regime at point of sale. Earlier this year New Delhi’s chief economic advisor, Arvind Subramanian, recommended a 40% levy under the new tax system for “luxury goods”, including high-end cars, tobacco and aerated beverages—a category dominated by multinationals including PepsiCo and Coca-Cola. Packaged juices, which are largely locally produced, would not be affected.

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Coca-Cola India slammed the tax as being detrimental to Prime Minister Modi’s “Make in India” campaign to draw foreign investors to the country. The top-tier tax proposal has since been reduced to 28%, however—though still up from the current 17-18%.

The Indian Beverage Association has been arguing vociferously that carbonated drinks are by no means luxury goods and serve a need for consumer hydration. The standing of low-calorie carbonated drinks under the regime is still unclear, though these account for less than 1% of the country’s soda market. The new GST, a Modi flagship policy, is expected to be introduced in 2017.

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