Irish sugar tax: EU clears the way for levy to start on May 1

26 Apr 2018

26 Apr 2018 --- A few weeks after the UK began to enforce its much-debated sugar tax policy, Ireland is now implementing the measures in a bid to encourage consumers to opt for healthier alternatives and tackle the growing obesity problems facing the population. As consumers in Britain are adapting to the levy on sugar-sweetened drinks (imposed on April 6), Ireland is days from starting its sugar-sweetened tax after the European Union cleared the way for the levy to come into effect next week.

Ireland’s tax will push up the price of popular sodas, adding 30 cents per liter to the price of soft drinks containing more than 8g of sugar per 100ml.

There are two rates of tax; 20 percent liter on drinks with 5g of sugar or more but less than 8g/100ml and the 30 percent per liter applies to beverages containing 8g or more of added sugar per 100ml.

As with similar taxes in Britain – which also has two tiers; a lower rate of 18 pence per liter for beverages with a total sugar content between 5-8g per 100ml and a higher price of 24 pence per liter for drinks with total sugar more than 8g per 100ml – the Irish government is trying to encourage consumers to make healthier beverage choices while also incentivizing the softs drinks industry to reformulate, cut sugar content and offer a selection of low to no-sugar alternatives.

Pure fruit juices are not subject to the tax. However, if so much sugar is added to fruit juice, then it could become taxable if the overall sugar content is pushed up.

Dairy products are outside the scope of the tax on the basis that dairy offers both nutritional values, such as calcium and protein, and also provides satiation preventing excessive consumption.

European Commission concludes sugar tax does not involve State aid
Ireland’s sugar tax follows a European Commission conclusion that Ireland's sugar tax does not involve State aid.

In February, Ireland notified to the Commission its plans to introduce a sugar-sweetened drinks tax with the aim of obtaining legal certainty that the measure did not involve any State aid within the meaning of EU rules.

In particular, the Irish tax will apply to soft drinks, i.e., water- and juice-based beverages containing added sugar with a sugar content of five grams or more.

It is a member state's right to decide on the objective of different taxes and levies. At the same time, to comply with EU State aid rules, member states must design taxes in a non-discriminatory manner.

In its assessment, the Commission found that soft drinks can be treated differently to other sugary products given health objectives. For example, the Commission took into account the fact that soft drinks are the main source of calories devoid of any nutritional value and thereby raise particular health issues.

Furthermore, soft drinks are particularly liable to lead to overconsumption and represent a higher risk of obesity, also compared to other sugary drinks and solid food.

On this basis, the Commission concluded that the scope of the Irish sugar-sweetened drinks tax and its overall design are consistent with the health objectives pursued and does not unduly distort competition.

Ireland’s government has welcomed the EC’s approval of the sugar-sweetened drinks tax, emphasizing that Ireland has engaged in extensive and constructive discussions with, and submitted a formal notification to, the EC to ensure that once commenced, the sugar tax, does not infringe EU State aid law.

That process is complete and the tax can commence on May 1, 2018.

Approximately €40 million in a year is expected to be raised from Ireland’s sugar tax. Much of the industry’s reformulation work has already been carried out with sugar reduction remaining high on the agenda for the soft drinks sector.

And it is expected that as industry reformulates further and consumers opt for healthier options, this figure will reduce over time.

The drinks tax is one of many measures that Ireland is implementing as part of an overall policy to tackle obesity in adults and children. It takes account of World Health Organization (WHO) recommendations to limit consumption of sugary drinks as part of a strategy to tackle obesity.

“This is significant and positive news and represents major progress under Healthy Ireland towards tackling obesity,” said Minister for Health, Simon Harris TD.

“With one in four children on the island of Ireland either overweight or obese, this tax is one of a range of measures that can help change parents’ and children’s behavior. There is no nutritional value in these sugar-sweetened drinks and it has been proven that the intake of these beverages, particularly in children, leads to weight gain and tooth decay.”

“Our Healthy Weight for Ireland – Obesity Policy and Action Plan 2016 sets out a range of policy measures and interventions to reduce the number and proportion of overweight adults and children in Ireland and this is one of the significant measures outlined. The industry also has its part to play in this and we hope to see continued reformulation of products to reduce levels of added sugar in these products.”

Minister of State for Health Promotion, Catherine Byrne TD adds how the sugar tax measure will help parents help their children healthy and contribute towards making “the healthy choice, the easier choice.”

Ireland’s Minister for Finance and Public Expenditure and Reform, Paschal Donohoe, says that the tax is an essential signal to industry to reformulate their products to reduce the sugar content offered to consumers.

“From the consumer perspective, the imposition of a financial barrier on sugar-sweetened drinks will result in reduced consumption by incentivizing individuals to opt for healthier drinks,” he said.

“The introduction of the tax delivers on the commitment made in the Program for Partnership Government and will ultimately benefit society as a whole.”

By Gaynor Selby