US: Philadelphia Soda Tax Comes into Force

04 Jan 2017 --- Despite efforts to legally block the tax on sugary beverages in Philadelphia new legislation is now in effect increasing the cost of soda, diet drinks and other beverages by 1.5 cent-per-ounce. 

The new tax has been met with mixed response. Although there is large support from health advocates, local authorities and some consumers, others are against the levy, including the American Beverage Association which was part of a legal challenge to stop the tax coming into force. 

Speaking with FoodIngredientsFirst Anthony Campisi - spokesman for the Philadelphians Against the Grocery Tax Coalition, a group of more than 30,000 Philadelphians and 1,600 businesses opposed to the beverage tax - claims the tax is already having a negative impact in the area.

“As a result of this 1.5 cents an ounce levy, businesses are being forced to increase prices considerably. In some cases, consumers will be paying more in taxes than the price the products are being sold at,” he says.

“And because this tax hits more than 1,000 different types of beverages – from fruit juices to sports drinks to teas to no-calorie and low-calorie options – it is going to be difficult for working families to avoid paying more.”

“Because Philadelphians with cars or who live near the city’s borders will be able to avoid this tax by shopping in the suburbs, the impact will most heavily be felt in poorer neighborhoods where families don’t drive. This is why we continue to oppose this regressive tax, which hurts both families and small businesses.”

The tax, which will affect sodas, teas, sports drinks, flavored waters, bottled coffees, energy drinks, and other products, will be levied on distributors of sweetened beverages, not on consumers at the time of purchase. It is estimated to raise approximately US$91 million annually for expanding educational programs for young kids in the city, creating community schools, improving parks, landscapes and reaction centers as well as offering a tax credit for business that sell healthy drinks. 

Some products are exempt such as baby formula and drinks that are more than 50 percent made of fresh fruit, vegetables or milk. 

Meanwhile, the Pennsylvania Food Merchants Association claim the tax will cause many products to double in price, putting a financial strain on many consumers. 

“Items such as juice drinks, sodas, teas, sports drinks and fountain sodas will no longer be affordable for many Philadelphia residents,” said David McCorkle, PFMA president and chief executive officer. “This unfair tax will really hurt Philadelphia consumers, who are already challenged to pay for groceries.”

PFMA adds that because the tax is assessed on product distributors, they will have no choice but to increase the price of the products because “food retailers already operate on slim margins and will have to pass the product increase o to consumers.”

“Our members expect to lose business due to this tax,” said McCorkle. “Consumers are going to leave the city to buy their groceries. It will mean lost customers and business for city retailers and could leave them with tough decisions to layoff employees or even close.”

Philadelphia City Council passed the country’s first broad-based beverage tax in June and it came into force on January 1, 2017. 

by Gaynor Selby