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UK's sugar tax will raise less revenue than expected

Published 09 March 2017

UK Chancellor Phillip Hammond said that a sugar tax on soft drinks will raise less money than anticipated as companies have started working on reducing the quantity of sugar they use in their drinks.

In his budget statement, Hammond confirmed that the tax would be levied as per the same two bands proposed last year.

While the lower slab rate is 5g per 100ml and the higher slab is for sugar content which is 8g or more per 100ml.

The Government has proposed to have a tax rate of £0.18 to £0.24 per litre unit charge according to the sugar content.

But he noted that this measure would add £380m to the treasury, instead of the £520m.

In order to avoid the tax burden, soft drink makers are already reformulating drinks with less sugar.

The Chancellor also stated that in spite of lesser revenue estimate, the government plans to provide £1bn in funding for additional spending for UK schools.

The move has been hailed by health experts as a ‘need of the hour’ move. The British Medical Association council chair Mark Porter said:  “This is a welcome and crucial move which will help to reduce the prevalence of obesity in the UK.

“We know from experiences in other countries that taxation on sugary drinks can improve health outcomes. With one in five children starting primary school – aged four or five – overweight,  this is a vital step forward; yet a sugar tax alone is not enough.”

He stated that to control obesity in the UK, there should be restrictions on junk food marketing that targets children.

On the other hand, the British Soft Drinks Association director general Gavin Pattington said: “Given current increases in cost of goods, we're surprised the Treasury wishes to put more pressure on businesses and raise prices for hard-pressed consumers.

“It's also ironic that the tax hits the soft drinks category, which has led the way in helping consumers reduce sugar intake - down nearly 18% since 2012.  We are also the only sector with a calorie reduction target for 2020.

Image: The UK government plans to continue with the proposed tax on sugar content in drinks. Photo: Courtesy of tiverylucky/FreeDigitalPhotos.net.