SDIL comes into force amid FWD concerns

The sugar tax (Soft Drinks Industry Levy, or SDIL) on soft drinks came into force in the UK today (April 6).

Manufacturers will now have to pay a levy on the high-sugar drinks they sell.

Ministers and campaigners believe it has already proved to be a success with many firms reducing sugar content ahead of the change. But others say it is still too early to judge the impact.

Leading brands such as Fanta, Ribena, Irn-Bru and Lucozade have cut the sugar content of drinks, but Coca-Cola has not (preferring instead to launch new low and no sugar lines).

The introduction of the SDIL means the UK joins a small handful of nations, including Mexico, France and Norway, which have introduced similar taxes.

The levy is being applied to manufacturers – whether they pass it on to consumers or not is up to them.

Drinks with more than 8g per 100ml will face a tax rate equivalent to 24p per litre. Those containing 5-8g of sugar per 100ml will face a slightly lower rate of tax, of 18p per litre.

Pure fruit juices will be exempt as they do not carry added sugar, while drinks with a high milk content will also be exempt due to their calcium content.

Originally, the Treasury forecast it would raise more than £500m a year, but that has now been reduced to £240m because some manufacturers have reduced the sugar content in their products.

In England that income is being invested in schools sports and breakfast clubs.

Products such as cakes, biscuits and other foods are not covered by the tax, although a separate initiative is encouraging manufacturers to reduce the sugar content of those items voluntarily.

Public Health England also hopes it will improve the oral health of children.

To coincide with the introduction of the levy, the agency released figures showing a child in England has a tooth removed in hospital every 10 minutes due to preventable decay.

But some bodies – including FWD – have expressed concerns that the SDIL will have unitended consequences, particularly the creation of ‘grey markets’.

Writing in the April issue of Wholesale News, FWD chairman Andrew Selley said: “Imposing a tax in the UK creates the opportunity for someone to avoid it, sell into the market in opposition to those who trade within the law, and make a tidy profit on the deal. The levy brings a new, much darker shade of grey to the category.

“FWD members could find themselves facing competition from unscrupulous importers, undermining the legitimate market by ducking the levy and targeting retailers with discounted stock.

“The current legislation requires that the levy be paid by the importer – but HMRC and the Border Force have a lot on their plate as we prepare for Brexit and there is a real risk of fraud.

“We absolutely have to avoid the scenario we saw in the worst years of alcohol duty fraud, where FWD member wholesalers would suddenly see sales drop off a cliff whenever illicit supplies flooded into their area. FWD is working with Coca-Cola and the British Soft Drinks Association to raise awareness of the issue so that retailers are not tempted to buy when they are offered fraudulent stock by white van sellers, and to ensure the right measures are in place for enforcement officers to tackle this illicit activity.”

 

 

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