The Sour Taste of the Sugar Beverages’ Tax

By Lindi-Ann Jonker

Whether limiting sugar tax to sugar sweetened beverages alone would help curb South African’s growing obesity epidemic and associated conditions such as type 2 diabetes and have any meaningful impact without considering a multi-pronged approach to the problem is largely debatable, but falls outside the scope of this article.

South African Revenue Services (SARS) joins the UK and Ireland who will be collecting the Sugary Beverages levy (SBL) as from 1st April 2018.

This levy under the Health Promotions Levy on Sugary Beverages falls under the Rates and Monetary Amounts and Revenue Laws Amendment Bill, 2017, as promulgated in Parliament on the 5th December 2017.

The new levy is part of government’s programme to prevent and control non-communicable diseases (NCDs) and to assist in the prevention and control of obesity.  South Africans are the 8th highest consumers of sugar in the world.

The SBL levy is fixed at 2.1 cents per gram of sugar content that exceeds four grams per 100ml, which means that the first 4 grams per 100ml are levy free.

Sugary beverages subject to the levy include:

  • Chocolate and other food preparations containing cocoa:
    • Cocoa powder containing added sugar for the preparation of making beverages
  • Syrups and other concentrates or preparations for making for making beverages not having a basis of fruit juice excluding drinking straws containing flavouring preparations;
  • Syrups and other concentrates or preparations for making for making beverages with a basis of fruit juice excluding drinking straws containing flavouring preparations;
  • Drinking straws containing flavouring preparations;
  • Waters, including mineral waters and aerated waters containing added sugar or other sweetening matter or flavoured in sealed containers holding 2.5 litres or less;
  • Non-alcoholic beer in sealed containers holding 2.5 litres or less, excluding those with a basis of milk;
  • Fizzy soda’s.

SBL will be paid in addition to any other Customs and Excise Duty and will be levied on sugar content, meaning both intrinsic and added sugar as well as sweetening matter (syrups and other concentrates, not having the basis of fruit juice).

The sugar content will be calculated as certified on a recognised test report from a testing facility accredited with SANAS or ILAC (South African National Accreditation System or International Laboratory Accreditation).  In the absence of a valid test report, a deemed sugar content of 20 grams per 100 ml will be assumed.  Powder and liquid sugar concentrates will be calculated on the total volume of the prepared beverage.

All manufacturers are required to register from February 2018 but only those manufacturers with a total annual sugar content in excess of 500 kg per year need to be licensed and will pay the SBL. This means that non-commercial or micro manufacturers are expected to register but will not be subject to the SBL. Licencing and registration of manufacturers with SARS is to be completed by 16th March 2018.

The levy will affect all sugary beverages which have been manufactured in or imported into South Africa.  Imported products will be taxed when they are cleared for home consumption and locally manufactured products will be taxed at source.

SBL is a domestic consumption tax and is therefore not payable on sugary beverages that are exported.

Licensed manufacturers must declare and pay the SBL within 30 days after the end of the calendar month.  SBL returns and payments can be submitted electronically via SARS E-Filing and at Customs and Excise branches.

South Africa joins the UK, Ireland, Portugal, India, Saudi Arabia and Thailand, who have introduced similar taxes.  South Africans can expect to pay, on average, 11% more for sugary drinks with fruit juices (where sugar occurs naturally) remaining exempt from this levy for now.

Lindi Jonker, of Business Accounting Network is the franchise owner of the area practice at N1 City, Cape Town.

 

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