Public should not be sweet on a thinly veiled consumer tax

  • Consumer tax: the Sugar Tax Bill does not apply to prepackaged imported baked goods (file photograph)

    Consumer tax: the Sugar Tax Bill does not apply to prepackaged imported baked goods (file photograph)

In January I wrote two opinion pieces on the proposed sugar tax. Given that the Government has now laid the Customs Tariff Amendment (No. 2) Act 2018 before the House of Assembly, it is worth reminding you of what the World Health Organisation recommended should be done to give sugar tax a real chance of success in reducing obesity.

Let’s look at those recommendations and grade them based on what will be passed by your government:

1, “Retail prices on sugar drinks would need to be raised by 20 per cent or more.” The Sugar Tax Bill lays out a tariff of 75 per cent on imports of certain products containing sugar, so presumably this will translate into at least a 20 per cent rise in retail prices. Presumed pass.

2, “Subsidies for fresh fruit and vegetables would need to be between 10 per cent and 30 per cent.” Absolute fail. The existing tariff on most imported fruit and vegetable is, I believe, 5 per cent, which is remaining in place — never mind a subsidy

3, Taxing “other foods and beverages high in sugar, salt and fat” up to 50 per cent would help to reduce obesity. Absolute fail. One of the issues raised repeatedly is that there are many other food products that contribute to obesity and are far more unhealthy

4, “Earmarking revenues raised from the sugar tax for healthcare.” Absolute fail. The Government will not ring-fence sugar tax revenue for anything specific

5, “Proper monitoring and evaluation to measure the effect of the sugar tax.” Likely fail. Given any government’s ability to properly monitor most things, I don’t believe this will happen

6, Requiring warning labels on taxed products as an education strategy. Absolute fail.

7, Drafting a multidisciplinary policy and implementation plan that includes advocacy for political buy-in, monitoring and evaluation is critical. Partially successful. The Ministry of Health has done an OK job in warning residents about obesity

It is worth noting that waters not containing added sugar or sweetening or flavour will still be taxed at 15 per cent and not 0 per cent. So what is the overall result based on WHO recommendations? It is clearly a fail. What in fact has happened is that the Government is introducing a 75 per cent tariff on beet sugar, cane sugar, cane sugar containing added flavouring or colouring, sugar confectionery including white chocolate — not cocoa — sweetened preparations for processing such as dissolving in water, milk or other liquid, flavoured syrups and aerated waters containing added sugar or other sweetening matter.

In a very practical sense, this means a 75 per cent tax on snow cone syrups, all sugar that you would make baked goods with, lemonade and ice cream, all sodas, soda syrups, cordials and sugar-based drink powders.

There is no corresponding tax break or subsidy to encourage consumers to buy healthy snacks such as fruit or vegetables or a bottle of water. The whole thing is almost like a practical joke. So what has the Government done? In short, the tax will be bad for local businesses, especially small businesses.

Why do I say this? It is simple. The Sugar Tax Bill does not apply to prepackaged imported baked goods — in other words, not made in Bermuda. So if you are in a shop and see locally made ice cream versus Häagen-Daaz, the locally made ice cream will have to now incorporate the 75 per cent tax it incurred on the sugar imported to make the ice cream.

A simple fundraising bake sale will need to raise its prices to account for the increase in bulk sugar as a result of a 75 per cent import duty since the wholesalers will simply pass on the sugar tax to the consumer.

Those delicious chocolate chip cookies will now be much more expensive — worse if the cookie has white chocolate. The sugar tax does not apply to packages of imported cookies, by the way. The tax will affect the price of already high cocktails in our bars and restaurants, which has the potential for making drinks prohibitive for tourists and locals alike.

This is a consumer tax, straight and simple. The sugar tax will not affect the big importers who supply the supermarkets, since they will likely increase their wholesale price charged to the supermarkets.

In turn, the supermarkets will raise their prices on the sugar-taxed goods, which you the consumer will now pay so you can get your soda or chocolate fix. The sugar tax will not work in the long term and certainly not in its ill-considered form.

This has been aptly demonstrated in places such as Mexico, where similar taxes changed behaviours in only the immediate short term before consumers returned to their old buying habits. The sugar tax is not being specifically earmarked for any particular budget line item such as education or child healthcare — in Philadelphia, the sugar tax was earmarked for specific matters.

Let me be clear. In principle, I support a sugar tax if it is properly implemented and following all the WHO recommendations.

My family have made a conscious decision already to limit sugar intake owing to the health implications, and not because of the sugar tax.

I don’t own shares in or have any interest in any food supplier, grocery store or any other entity that could be affected by this tax, and I have not been asked to advocate on behalf of any entity or party. I wouldn’t if asked.

I am simply disturbed that the sugar tax is being brought into place, which will not achieve its stated aim; it will disproportionately affect small Bermudian businesses and will end up costing many Bermudians more money at the till.

It will make an already suffering restaurant and bar sector charge more for their drinks and desserts, all without the corresponding duty reductions on healthy choices and without specific earmarking for pre-identified spending plans.

As has been typical with this government, it knows best. It surely can implement a sugar tax and not follow international guidelines and recommendations. It can ignore the experiences of other, far larger jurisdictions. It is just that good.

With a present majority of 24-10, we just have to suck it up. Like I said, personally I really don’t care. The sugar tax will not have any tangible effect on me or my family. But I actually feel sorry for everyone else who is getting sucked in by the you-know-what. Sweetly taxed dreams.

Michael Fahy is a former Minister of Home Affairs, Minister of Tourism, Transport and Municipalities, and Junior Minister of Finance under the One Bermuda Alliance government

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Published May 23, 2018 at 8:00 am (Updated May 23, 2018 at 7:33 am)

Public should not be sweet on a thinly veiled consumer tax

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