Coca-Cola India warns of factory closures if 'sin tax' is implemented

The Indian subsidiary of Coca-Cola Co said yesterday it may have to close some bottling plants if the government pushes through a proposal that would subject fizzy drinks to a 40% ‘sin tax’.

Coca-Cola India warns of factory closures if 'sin tax' is implemented

The government’s proposal is part of a broader fiscal overhaul. The beverage maker operates 57 factories and bottling plants across India.

It said a proposal to group sugary sodas with higher-taxed luxury cars and tobacco would hurt demand for its drinks.

“It will lead to a sharp decline in consumer purchase,” Coca-Cola India said.

“In these circumstances, we will have no option but to consider shutting down certain factories.”

India’s ruling party is trying to push a national goods and services tax through parliament.

The tax would replace a myriad of state sales taxes and shake-up government revenue.

A government-appointed panel examining the new tax has suggested a standard rate of 17% to 18%, and a higher tax of 40% on some goods, including the carbonated drinks Coca-Cola sells.

Coca-Cola rival PepsiCo Inc in India did not respond to a request for comment.

Several countries are debating so-called ‘sugar taxes’ to tackle obesity and encourage healthier lifestyles. While more than a fifth of India’s population lives below the official poverty line, the country is home to the third-highest population of obese people after the US and China.

Coca-Cola India employs 25,000 staff.

It said it is on course to invest $5bn (€4.55bn) by 2020 as it looks to raise production to target a growing middle class.

The company re-entered India after economic liberalisation in the early 1990s. It has at times had a tricky relationship with local authorities.

In Britain, lawmakers last month urged the government to introduce tough measures, including a tax on sugary drinks and controls on price promotions for unhealthy food and drink, to help tackle childhood obesity.

The UK parliament’s health committee said there was “clear evidence that measures to improve the food environment” must be used to tackle obesity, treatment of which costs the state-run health service £5.1bn a year.

However, a spokesman for David Cameron said the prime minister did not think a sugar tax was “the right course of action” and that his government would unveil a national childhood obesity strategy in the New Year to set out its preferred measures.

The committee also said there should be tougher controls on the marketing and advertising of such food and drink and that labels should show sugar content in teaspoons, among other measures.

“One third of children leaving primary school are overweight or obese, and the most deprived children are twice as likely to be obese than the least deprived,” said Sarah Wollaston, chairwoman of the committee.


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