Missing the boat on sugar tax
The Progressive Labour Party government has framed the sugar tax as a financial disincentive that will modify behaviour, reduce the incidence of diabetes and, therefore, contribute to reducing the overall cost of healthcare in Bermuda.
I do not believe that the tax as it stands will successfully achieve any of those outcomes.
While I voiced my concerns during the Senate debate, I feel it would be beneficial to the national conversation to expand upon these concerns in writing because, as in its present form, the sugar tax is simply raising the cost of groceries. The sugar tax falls short of its intended purpose in three significant ways:
• Method of calculation
• Protection of children
• Concessions for small business
Method of calculation: sugar is now essentially being levied as an excise tax in the same fashion as tobacco and alcohol. Unlike alcohol, which is taxed per litre, goods containing sugar are taxed based on their purchase price when imported to Bermuda. This means that healthier options with less added sugar, higher-quality ingredients and a higher starting-price point are being taxed more than candy bars that contain far more sugar, almost no nutritional value but a lower starting-price point.
For example, a 40-gram Kind bar with four grams of sugar and an import purchase price of $1.18 will now pay $0.89 in sugar tax (duty) while a 40g Kit Kat bar with more than 20g of sugar with an import purchase price of $0.66 will pay only $0.50 in sugar tax. (Note: import purchase prices are approximations inferred from final retail price.)
The real effect of levying a sugar tax on purchase price and not sugar content is that the healthier alternatives, which are generally more expensive to begin with, may simply become unattainable. The effective sugar tax on the Kind bar in the earlier example is $155 per kilogram while the effective sugar tax on the Kit Kat bar with five times the amount of sugar is a mere $16/kg.
Protecting children: a 2014 Steps to a Well Bermuda survey of more than 1,200 adults found 74 per cent of those interviewed to be overweight or obese. That same survey estimated a prevalence of diabetes in Bermuda to be 13 per cent, almost 50 per cent greater than the global average.
Given Bermuda's staggering levels of obesity and diabetes, one would think that extra attention would be given to ensuring behaviours are “corrected” during our children's formative years before they become ingrained problems as adults. Instead, sugary breakfast cereals have been exempted from the sugar tax and fruit juices, no matter how sugary, are paying only 5 per cent duty. (Also, remember how the Government promised to earmark a percentage of the tax towards health initiatives. We have heard nothing since that now-broken promise was made).
There is a wide range of sugar contents in breakfast cereals. Shredded Wheat and Quaker Oats both have about 1g of sugar per 100g of cereal. Frosted Flakes, on the other hand, has 37g of sugar per 100g of cereal. Clearly not all cereals are equal as relates to sugar content.
The irony is that cereals were exempted from the sugar tax because the Government recognises that the existing tax does not take differences in sugar content into consideration.
Bottled fruit juices may sound healthy, but most are served in ten to 12oz portions that exceed the recommended serving size of 4oz by threefold (American Institute for Cancer Research).
In many cases, bottled fruit juices remove the insoluble fibre that would have been consumed had the equivalent fruit been eaten whole. Most orange juices contain about 10g sugar per 100 millilitres, which is equivalent to the amount of sugar in Coca-Cola.
Many grape juices contain twice the amount of sugar contained in Coca-Cola.
Small-business relief: relief for small business comes in the form of a customs procedure code that would give small businesses duty relief on their Bermuda Customs declaration. The problem, of course, is that most small businesses don't ship in their own sugar directly, but rather order through a wholesaler. The wholesalers will have already paid duty on the sugar when they originally imported
It will be interesting to see if any of the purported benefits for small businesses materialise, as it would cost the wholesalers time and money to submit any kind of refund application with HM Customs.
A 75 per cent tax is excessive and, as structured, simply drives up the cost of living in Bermuda without actually incentivising healthy behaviours. Mexico has had success driving consumption towards less sugary alternatives with a mere 10 per cent tax on the purchase price of sugar-sweetened beverages containing more than five grams of sugar per 100ml.
England adopted a similar approach but added a second, more expensive band for drinks with more than 8g of sugar per 100ml. Another method that may work in Bermuda could be to tax the grams of added sugar directly, which is how alcoholic beverages are taxed.
Available data on childhood obesity in Bermuda is somewhat dated; however, present figures are due next month from a school assessment survey with numbers from the Premier's Youth Fitness Programme, which was introduced by the One Bermuda Alliance. The International Diabetes Federation determines that up to 80 per cent of Type 2 diabetes — once considered adult-onset, but now becoming more common in children — can be prevented with the adoption of healthier lifestyles. There is absolutely no reason why breakfast cereals and juices should be exempted from a sugar tax that correctly targets the more sugary options while maintaining the price of the healthier alternatives.
In summary, while the sugar tax may have contributed to elevating the conversation surrounding food choices, the implementation entirely misses the mark. The tax does not actually target the most sugary options, does even less for food and drink consumed most by children and only pays lip service to small business.
You cannot blame the public for seeing this tax as simply a money grab that increases the cost of living.
I will close on one last example of unintended consequences. Everywhere coffee is served, sugar is offered at no extra charge. As the cost of sugar packets went up, businesses increased the cost of coffee to protect their margins. The person that drinks their coffee without sugar and the person that drinks their coffee with seven packets of sugar now both contribute equally to the increased tax. However, neither is incentivised to consume less sugar; just less coffee, perhaps, as it now costs more.
• Nick Kempe is the Shadow Minister of Finance and the Opposition Senate Leader