The phrase ‘Sugar Tax’ is a misnomer in the Sri Lankan context, because Sri Lankan tax system will not witness an introduction of a new tax called ‘Sugar Tax’ due to the budget proposals, said Tax Principal of KPMG Suresh R. I. Perera.
In an interview with Daily News Business he said that the charge on sugary beverages will be introduced in the form of Excise Duty.
Perera who is also Chairman of the Tax Committee of the Bar Association added that the sweetened beverages will be imposed Excise Duty under Excise (Special Provisions) Act at the rate of 50 cents per gram of sugar or Rs 12 for one litre of drinks, whichever is higher.
Budget 2018 has estimated Rs 5 billion from the imposition of “Sugar Tax” in Sri Lanka to the State Coffers. As the total expected from the Revenue Proposals is Rs. 110 billion, the revenue from ‘Sugar Tax’ accounts for 4.5% of the total estimated revenue from this year’s budget.
In UK half a billion of pounds collected from Sugar Tax will be diverted to fund sports & other after school activities. Perhaps diversion of the funds collected from Sugar Tax in Sri Lanka to fund specific activities such as prevention and treatment of diabetes or childhood nutrition programmes would be a welcome move.
At present sweetened beverages other than fruit and vegetable juices classified under H.S. Code 22.02 will be paying this excise duty of Rs 12 per litre.
This H.S. Code covers water including mineral water, aerated water containing added sugar or other sweetening matter or flavoured and other non alcoholic beverages not including fruit or vegetables of heading 20.09. This excludes fruit juices (including grape must) vegetable juices, unfermented & not containing added spirit, whether or not containing added sugar or other sweetening matter as per the tariff code.
In order to reduce consumption of sugar and reduce obesity, diabetes and prevent tooth decay World Health Organisation (WHO) has recommended countries to impose a tax on sugary drinks.
As per statistics of Diabetes Association of Sri Lanka approximately 4 million of the population is suffering from diabetes. i.e. 20% of the population.
There are about 20 countries in the world that have imposed a ‘Sugar Tax’ such as Dubai, Hungary, France, South Africa and Thailand. Many countries have been using the tax even before 1950’s.
The Gazette published immediately after the Budget speech on November 10, under Excise (Special Provisions) Act has provided the legal frame work for the imposition of the ‘Sugar Tax’ in Sri Lanka with effect from 10th of November itself.
The counter argument runs that health benefit to be derived from sugar tax will be experienced at highest, in the low income strata of the society.
It is likely that the introduction of the ‘sugar tax’ would reduce the consumption of sweetened beverages in Sri Lanka too.
“The policy makers will be called open in the future to decide whether, the tax should be extended to cover other products containing sugar in order to rein the alarming increase of diabetes in the country.” (SS)
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