The government today published its plans for the Soft Drinks Industry Levy, claiming it is a tax it “would rather not collect”.
As it released the results of a consultation over the plans, the Treasury said more than half of respondents to its consultation were in favour of the levy, with many saying they wanted the controversial proposals to be expanded to cover other products.
”The levy has been designed to drive reformulation in the soft drinks market, and over the past few months we have seen the effects that government action is having”
The government said 95% of medical and health bodies that responded to the consultation were supportive of the proposals, along with 73% of retailers.
However, there was huge opposition to the scheme from suppliers, with 78% of manufacturers and their trade bodies opposed to the tax.
The Treasury said the impact of the levy was already making itself felt with some companies, such as Lucozade and Tesco, announcing plans for major reformulation of products so they could avoid paying the tax.
However, as revealed by The Grocer on Friday, it has put back decisions over how much companies are going to be taxed until the Budget in the spring.
When the plans were first announced by George Osborne, the Office for Budget Responsibility estimated that the cost of the levy would “be passed entirely on to the price paid by consumers” at a rate of 18p per litre for the lower tier and 24p per litre for the upper tier.
That would put an estimated extra 8p on a regular can of Coca-Cola, Pepsi and Irn-Bru, and 6p on a regular can of Fanta and Sprite.
Dairy drinks excluded
The government also confirmed it plans to exclude dairy drinks from the tax, although it has promised further action to look at how sugar consumption from such products - as well as fruit juice - can be tackled.
Under the proposals Public Health England will add dairy drinks to the list of the categories it is in talks with over sugar reduction.
The Treasury also set out new plans to tackle fears the tax may lead to a surge in the so-called ‘grey market’ for untaxed imports, which could undermine UK-based producers.
It said it would introduce legislation to ensure only products imported from overseas manufacturers that would be eligible for the small operator relief on their total production would be exempt from the levy, ensuring, it claimed, that importers cannot gain a competitive advantage over UK producers.
“The levy has been designed to drive reformulation in the soft drinks market, and over the past few months we have seen the effects that government action is having,” said financial secretary to the Treasury Jane Ellison.
“Several major companies in the UK soft drinks market have recently strengthened their commitment to reformulate before implementation, and therefore some of these will not pay the levy on any of their drinks by the time the tax goes live in April 2018. This shows that change is possible. We recognise the work of market-leading companies, and acknowledge the investment costs associated with reformulation work. Individual companies’ commitments to recipe changes, portion re-sizing and marketing lower sugar brands in the run up to April 2018 will all be rewarded through the levy design. The government has always been clear that this is a levy we would rather not collect - but one which is necessary to help drive down sugar consumption and tackle childhood obesity.”