Excise Tax on SSBs in Foreign Countries

Asia Pacific

ASEAN is said to be one of the worlds most diverse, fast-moving, and competitive

economic regions composed of 10 member nations: Thailand, Malaysia, Philippines,

Indonesia, Vietnam, Myanmar, Singapore, Cambodia, Laos PDR, Brunei Darussalam

(Shandia, 2016). In relation to this, according to National Tax Research Center (NTRC),

there are other member-countries in the ASEAN which are currently imposing an excise

tax on soft drinks and other types of non-alcoholic beverages to cut sugar consumption

as the numbers of people suffering from diabetes and obesity continue to rise (Jurado &

Amurao, 2017).

Figure 1 Excise Tax on Soft Drinks and Other Type of Beverages in Some

ASEAN Member Countries

Source: ASEAN Region: 2016 Food and Non-Alcoholic Beverage Tax Updat
 A. Thailand

Thailand consumes the twelfth greatest amount of sugar in the world and the

second greatest amount of sugar in the ASEAN region. Thailand imposes excise taxes

on certain non-alcoholic beverages including soda water, soft drinks, and unfermented

vegetable or fruit juices, as shown in the table below. Thailand uses both ad valorem and

specific excise taxes. It applies whichever form is higher, whether it be ad valorem or

specific charges. The excise tax system has been adjusted to complement the VAT

system.

From 2007 to 2015, the governments revenue from excise taxation was stable,

rising from 16 percent to 20 percent. In 2015, Thailands revenue from excise taxes was

$12.57 billion. The excise revenue from non-alcoholic beverages increased by 21

percent, from $416 million to $504 million between 2011 and 2015 (Shandia, 2016).

Figure 2 Tax Structure of Non-Alcoholic Beverages in Thailand

Source: ASEAN Region: 2016 Food and Non-Alcoholic Beverage Tax Updates
 B. Cambodia

Cambodia applies Specific Taxes on certain Merchandise and Services (STMS)

as a form of excise tax applied to imported goods and the provision of services. Products

subjected to the specific tax are soft drinks, alcoholic products, and beer, at 10 percent.

Local taxpayers are responsible for paying this tax to the tax administration by the 15th

of the month following the month that the supplies are produced (Shandia, 2016).

C. Laos PDR

Lao PDR levy tax on non-alcoholic beverages on which the excise tax is ad

valorem based and as such linked to the price/quality of the product and the spending

ability of the consumer, suggesting thereof that the excise tax is a revenue raising

instrument.

Laos imposes excise duties on carbonated drinks and invigorating drinks, at a

range between 5 and 25 percent (Figure 2). The country imposed tax rate of 5% to soda

water and carbonates, and 10% to other sweetened beverages. As noted this imposition

is mainly in response to harmful externalities related to health issues that can be

associated with the product. (ASEAN Excise Tax, 2013)

Americas

A. United States of America

Over the past thirty years, U.S. children and adolescents have dramatically

increased consumption of these beverages. Today, the average American consumes 50

gallons of sugarsweetened beverages (SSBs) each year and approximately 22

teaspoons of sugar from SSBs per day, far surpassing the recommended 5 to 9

teaspoons/day level. Soda and fruit punches constitute the top two categories of SSB

calories, although sports and energy drinks represent one of the fastest growing product

categories, especially among adolescents (Wang, 2010).

Reducing sugar-sweetened beverage (SSB) consumption has become a public

health priority because of strong evidence that SSBs increase risk of obesity, diabetes,

heart disease, and dental caries (Falbe et al. 2016). As of January 2009, 33 states in the

U.S. imposed a sales tax on soft drinks sold in grocery stores and vending machines at

an average rate of 5.2 %. Including all states with or without a specific tax on SSBs, the

nationwide average tax rate is 3.4 % on these beverages. In contrast, the average tax

rate for all food and beverages is 1%. However, the tax rate is never more than 10% of

the price (Wang, 2010). In November of 2014, Berkeley, California, became the first and

only US jurisdiction to pass an SSB excise tax for public health purposes. Berkeley levied

the $0.01-per-ounce tax on distribution of SSBs, including soda; energy, sports, and fruit-

flavored drinks; sweetened water, coffee, and tea; and syrups used to make SSBs (non-

SSBs such as diet soda are not taxed) (Falbe et al. 2016)
 B. Mexico

The government of Mexico has been faced with the enormous fiscal and health

consequences of obesity and made major regulatory changes. These include taxing two

components of the diet, Sugar Sweetened Beverages (SSBs) and non-essential foods

(unhealthy food with excessive saturated fat, sugar and/or sodium), to provide important

new revenue sources and reduce intake of SSBs and unhealthy food with excessive

saturated fat, sugar and/or sodium.

On January 1, 2014, the Mexican government began instituting two taxes. One is

a 1 peso per liter (effectively slightly less than 10%) excise tax on any (non-alcoholic and

non-dairy) beverage with added sugar. Concurrently, the government instituted an 8%

sales tax on a wide range of non-essential foods that are foods high in sodium, added

sugars, or solid fats. These include all salty and other snacks, confectionery products,

chocolate and products derived from cacao, puddings and flans, candy, peanut butter

and hazelnut butter, ice cream, and popsicles (Colchero, Popkin et al. 2016).

EMEA (Europe, Middle East, and Africa)

A. France

The French National Assembly passed a tax on all soft drinks with added sugar or

artificially sweetened to raise 280 million ($380 million) a year. Beverages without added

sugar, such as natural fruit juices, are excluded from the tax, in addition to beverages with

alcohol content. The tax will be paid by manufacturers and processors, as well as French

importers (Audran, 2011). Currently taxes all drinks with added sugar or artificial
sweeteners at 0.07 EUR (0.06) per litre and also energy drinks at 0.50 EUR (0.40) per

litre (Lavin & Timpson, 2013).

B. Hungary

Overweight and obese people are a majority today in OECD countries. The obesity

epidemic continues to spread, and no OECD country has seen a reversal of trends

since the epidemic began. Obesity rates have more than doubled in Hungary in 20

years, with one in four women and almost one in three men being obese today (OECD,

2016). In recent years, the Hungarian Government has taken major steps to improve

population nutrition. In 2011, the Hungarian Parliament passed legislation creating the

public health product taxa tax levied on food products containing unhealthy levels

of sugar, salt and other ingredients in an effort to reduce their consumption, promote

healthy eating and create an additional mechanism for financing public health

services. The public health product tax is collected at points of sale from consumers

who purchase a taxable food product and also from sellers when selling a taxable food

product in Hungary for the first time. The tax is per unit of product sold, measured in

kilograms or litres (Public Health Product Tax in Hungary, n.d.). Taxes have been

levied on sugary drinks at 5 HUF (0.01) per litre, energy drink at 250 HUF (0.70)

per litre, salty snacks and condiments at 200 HUF (0.56) per kg and sweets, biscuits,

ice-creams and chocolate at 100 HUF (0.28) per kg (Lavin & Timpson, 2013). Four

years since the tax was introduced, consumption of taxable unhealthy foods in

Hungary has decreased. Many food manufacturers have reduced or eliminated

unhealthy ingredients in their products, population awareness of healthy eating has

increased, and approximately US$ 219 million in revenue has been raised and

earmarked for health spending (Public Health Product Tax in Hungary, n.d.).

C. South Africa

The Minister of Finance announced in the February 2016 Budget a decision to

introduce a tax on sugar-sweetened beverages (SSBs) with effect from 1st of April

2017 to help reduce excessive sugar intake. The non-alcoholic beverage industry in

South Africa is made up of products such as juices, carbonated drinks, energy drinks,

bottled water, ice tea, dilutable beverages etc. However, it is dominated by carbonated

drinks. Growth in the non-alcoholic beverage sector has increased significantly since

the early 1990s. Consumption of SSBs at an early age sets a pattern for unhealthy

dietary habits leading to early onset type 2 diabetes and obesity which require chronic

care over the childs lifetime. This as a result will increase public healthcare costs in

the long term (National Treasury: Republic of South Africa, 2016). Evidence shows

that a tax needs to be introduced at a sufficiently high level to have a meaningful

impact on purchasing, consumption, and ultimately obesity and its consequences. A

systematic review showed that a tax of 20% on SSBs can lead to a reduction in

consumption of SSBs of around 20%. The proposed tax rate to be implemented in

South Africa, based on the current product labelling framework, is a tax rate of 2.29

cents per gram of sugar. This roughly equates to a 20% tax incidence for the most

popular soft drink (ASDA, 2016).

 Figure 3 Specific Tax on SSBs on Selected Countries

Source: ASEAN Region: 2016 Food and Non-Alcoholic Beverage Tax Updates
References:

ASDA. (2016). Position Statement on the Proposed Taxation of Sugar-Sweetened

Beverages in South Africa. Association of Dietetics in South Africa.

Audran, X. (2011). France to tax soft drinks - U.S. Companies to pay the most.

Falbe, J., Thompson, H. R., Becker, C. M., McCulloch, C. E., & Madsen, K. A. (2016).

Impact of the Berkeley Excise Tax on Sugar-Sweetened Beverage Consumption.

Jurado, F. J., & Amurao, M. L. (2017). Proposed Excise Tax on Sugar-Sweetened.

NTRC Tax Research Journal.

Lavin , R., & Timpson, H. (2013). Exploring the Acceptability of a Tax on Sugar-

Sweetened Beverages.

OECD. (2016, April). Unhealthy Lifestyles Call for Further Tightening of Public Health

Policies. Hungary: OECD Publishing

Shandia, M. (2016). ASEAN Region: 2016 Food and Non-Alcoholic Beverage Tax

Updates . International Tax and Investment Center.

Wang, Y. C. (2010). The Potential Impact of SugarSweetened Beverage Taxes in New

York State. New York City.

Colchero, M., Popkin, B., Rivera, J., & Ng, S. (2016). Beverage purchases from stores in

Mexico under the excise tax on sugar sweetened beverages: observational

study. BMJ, h6704. http://dx.doi.org/10.1136/bmj.h6704

Public Health Product Tax in Hungary. Retrieved from

http://www.euro.who.int/__data/assets/pdf_file/0004/287095/Good-practice-

brief-public-health-product-tax-in-hungary.pdf

ASEAN EXCISE TAX. (2013, August). Asia PAcific Tax Forum. Retrieved September

2017

Proposed Excise Tax on Sugar-Sweetened Beverages in the Philippines. (2017). NTRC

Tax Research Journal, p.4.

National Treasury: Republic of South Africa. (2016). Taxation of Sugar Sweetened

Beverages.