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Soft drinks companies plan legal action against UK government over sugar tax

DBR Staff Writer Published 21 March 2016

Soft drink manufacturers are planning to take legal action against the UK government over its decision to levy tax on sugary drinks.

soft drinks tax

The companies are considering the option of suing the government as they await further details on the tax, which is slated to become effective in 2018 with an implementation cost of £1bn.

Soft drink makers could sue the government through European courts based on the premise that other types of food and drink such as fruit juice and milk shakes are not included in the tax.

The sugar tax levy was revealed in the Budget 2016 as well as in the documents published by the Office for Budget Responsibility.

Through the new sugar tax, 24 pence a litre will be added to soft drinks with highest sugar content. This cost would have to be borne by customers through increased prices.

Announcement of the sugary drinks tax has resulted in a sharp decline in the share prices of major drinks companies such as Britvic, the maker of Robinson, and AG Barr, the maker of Irn-Bru, according to Guardian.

British Soft Drinks Association director general Gavin Partington said: "At this stage all options are on the table.

"We need clarification about how this tax is going to work, exactly what's excluded and what's not. Nothing can be ruled out at this stage."

Drinks major Coca-Cola is also considering legal action. The company's Britain spokesperson said: "We need to know more about the levy and how the government plans to implement it. Once this is clear to us, we'll decide on what steps to take as a business and how best to continue the work we have done to help people consume less sugar and calories from our drinks."

While introducing the tax in its Budget 2016, the UK government had defended it by stating that it is being effectuated considering the future generation and that the soft drinks makers have a two-year period wherein they could reduce the sugar content in their products.

A HM Treasury spokesperson defended the Chancellor George Osborne's announcement by stating: "He introduced a new levy on the soft drinks industry to pay for a doubling of dedicated sport funding for every primary school in the country, a huge expansion of breakfast clubs to ensure that every child gets the best start to the day, and new funding for a longer school day.

"The chancellor also made clear that this was a policy aimed at driving meaningful change. The new levy will not be introduced until 2018, giving companies plenty of time to change product mix and reduce sugar content."

Similar lawsuits have been brought against such taxes in Finland and Denmark, while the European Court of Justice thwarted the Scottish government's plans to introduce minimum alcohol pricing at the end of 2015.

Image: Soft drink companies likely to sue the UK government over sugary drinks tax. Photo: Courtesy of tiverylucky/FreeDigitalPhotos.net.