Rising price of alcohol has not impacted how much we drink, but makes us an expensive place to visit. So how will a sugar tax work? Paul Mills reports
IT is easy to believe that the Government, via the Revenue Commissioners, has only one objective and that is to take as much money from us as it can.
It does so in the guise of obtaining funds to provide services and infrastructure and as a means of regulating our behaviour.
Yes, someone decided that if we were doing something ‘experts’ said was bad or was a potential drain on the economy, it should be taxed out of existence.
So the volume of difficult-to-recycle plastic bags became an issue and government introduced a tax. It has considerably reduced the volume of plastic bags and has raised a lot of revenue.
Indeed, the number of plastic bags used once by shoppers in England dived by 85% after the introduction of a 5p charge last October.
In other words, in excess of 7bn bags were handed out by the major supermarket chains in the year before the charge, but only 500m were in the first six months after the charge was introduced, according to the UK Department for Environment, Food and Rural Affairs.
In Ireland, we introduced a smoking ban in closed public areas in the interests of the health of the citizens at large, and we led the world in imposing this restriction.
Mind you, that did not stop cigarette manufacturers from suggesting that the world would end, as a result.
Ireland and other countries have decided that cigarette packaging should be without any advertising and should also carry health warnings.
While the cigarette manufacturers have decided to fight this new imposition, governments appear to be holding their ground.
The plastic-bag tax was for environmental reasons and the smoking ban for health.
The success of the latter will take considerable time to evaluate, but health costs are expected to reduce considerably.
The latest proposal, or imposition, if you wish, is a ‘sugar tax’. The objective is to control the use of fizzy drinks and reduce the very high levels of childhood obesity in Ireland. Already, the representative body for the industry, the Irish Beverage Council, has said that a 10-cent-per-can increase to cover the tax would add €60 per annum to household grocery bills.
In the past, government has listened to the demands of industry vested interests as regards issues that might benefit the general public. The most recent is the relatively high differential between the interest rates offered by government-owned An Post and those offered by the so-called pillar banks. The banks were reported to have made representations to government to reduce An Post’s rates, and so it did, to the detriment of the rest of us, who must continue to labour under virtually zero interest on deposits and considerably higher rates on loans.
In making its decision on a sugar tax, government will, no doubt, be interested in Mexico’s success, following its imposition of a sugar tax in 2014. Mexico introduced a sugar tax of 10% and it has proven to be an excellent revenue-gathering exercise, already amassing US$2bn, considerably more than anticipated.
The temptation to follow suit will be mighty, but the Government here should tread carefully.
Firstly, while constantly increasing the price of alcohol has made us one of the most expensive locations in Europe, it has done very little to reduce alcohol consumption.
Secondly, our experience has been that such taxes, rather than being ring-fenced, go into general revenue, so when they start having an effect on consumption, tax is reduced and government then must look to other sources.
Lower taxes for more environmentally friendly cars are a case in point. Revenue has now been reduced and car tax is being increased again.
In addition, government is also looking at taxing the fluid used in e-cigarette’s, on the basis that it may raise a lowly €8m.
Government should be careful when considering yet more taxes, given that there are groups in the economy who do not appear to have suffered any downside from the impact of the economic crisis, which started in 2007-2008.
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