Soft drinks manufacturers claim a sugar tax could cost them €60m a year and cut revenue to the State while failing to improve public health.
In a plea to Finance Minister Michael Noonan to abandon plans to introduce the new tax in the October budget, the Irish Beverage Council (IBC) says the sugar penalty would be an “all cost, no benefit” measure.
A sugar tax has been considered for several years as a way of discouraging the consumption of sugar-sweetened food and drinks to combat the country’s growing obesity problem.
Many health professionals back the idea, in particular because the extra revenue raised would be ringfenced for public health initiatives.
The IBC director Kevin McPartlan, however, said while he accepted industry had a crucial role to play in tackling the obesity problem, a sugar tax would not work.
“We know from other countries that it doesn’t reduce demand for the product. What it will do is encourage cross-border trade which will cost the industry sales and cost the exchequer in terms of Vat on those lost sales,” he said.
The IBC says its members, which include industry heavyweights such as Britvic Ireland and Coca Cola Ireland and which between them directly employ 3,500 people, could lose €60m a year to cross-border buying.
In a submission to Mr Noonan, it says: “It cannot safely be assumed that such losses will not threaten employment or potential future investment here.”
It also says the resulting loss of Vat receipts to the exchequer would be €35m, and that the average household’s annual grocery bill would rise by €60.
It proposes instead that manufacturers be encouraged to continue their policy of “reformulation”.
“In recent years, the soft drinks industry has taken thousands of tonnes of sugar and billions of calories out of the national diet by changing recipes and offering consumers a wider choice of products. About half of all non-alcoholic beverages consumed in Ireland are now low and no-calorie drinks,” the submission says.
The Revenue Commissioners and the Department of Finance are still working out how the new tax could be imposed and collected.
Mr McPartlan said the fairest way to manufacturers would be to treat it as an excise but that would require all retailers to have a licence to sell soft drinks and to log regular returns of their sales. “It’s going to be cumbersome and costly to collect, whatever method is used,” he said.
Britain has plans to introduce a similar tax in 2018 and Mr McPartlan said the least the minister should do is hold off until then. He poured cold water on reports that the IBC was planning a legal challenge to the minister’s plan. “We wouldn’t rule it out in the future but, at the moment, we have no legislation to challenge.”
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