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Tax on sugar sweetened beverages

19 July 2016

South Africa

In his February 2016 Budget, the Minister of Finance announced a proposal to introduce a tax on sugar-sweetened beverages (SSBs) with effect from 1 April 2017. The intention of the proposed tax is to encourage reduced sugar intake. It forms part of the government's strategy to curb and address the issue of obesity and unhealthy diets in South Africa. 

Following from the Minister's Budget Speech, the National Treasury has issued a policy paper and proposals for public comment on the taxation of sugar sweetened beverages.

The proposed tax will be imposed on all beverages that contain added caloric sweeteners such as sucrose, high fructose corn syrup, or fruit-juice concentrates, including:

• Soft drinks

• Fruit drinks

• Sports and energy drinks 

• Vitamin water drinks 

• Sweetened iced tea, and 

• Lemonade

Any beverages that only contain sugar naturally built (that is, intrinsic sugars) into the structure of the ingredients (such as unsweetened milk and milk products, and 100% fruit juice) will be excluded from the tax.

Based on literature suggesting that a 20% increase in the price of SSBs may be required to have significant impact on purchase, consumption and, ultimately, obesity and population health, it is proposed that a tax rate of ZAR0.0229 (2.29 cents) per gram of sugar be implemented based on the current product labelling framework. This rate roughly equates to a 20% tax incidence for the most popular soft drink.

For SSBs that currently do not apply nutritional labelling, it is proposed that a relatively higher fixed proportion of sugar be assumed (that is, 50 grams per 330 ml) as an incentive for producers to move towards nutritional labelling until a mandatory labelling legislative framework is put in place.

The tax will be implemented through the Customs and Excise Act, with the duty being collected at factory gates or the ports of entry.

The due date for public comments is the close of business on 22 August 2016.

The team

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