Experts have suggested an increase on the sugar tax from its current 10% to 20% in order to improve health outcomes and support increased revenue collection.
The proposal comes as Finance Minister Tito Mboweni is due to deliver the 2021 Budget Speech next week. Experts say a further increase in sugary beverages will not only result in a reduction in communicable diseases like diabetes, it will also help support the country’s growing tax collection shortfall.
Government currently projects a R300 billion shortfall in revenue in this year’s budget.
However, experts say a significant shortfall in the region of R250 billion is still on the cards. They add that the government has lost out on sin tax collections due to the ban on alcohol and cigarettes sale during the lockdown.
Director of Research at the University of Cape Town, Corne van Walbeek, says, “Of the alcohol, tobacco, and sugary beverages – those taxes in total comprise 3.5% of government revenue. The government is going to be collecting substantially less of what that they had anticipated.
The main reason for that is because of the ban on cigarette sales during 2020 for 20 weeks and the three different bans on the sale of alcohol during that same time period.”
Call to double the sugary beverage levy:
Director of the South African Medical Research Centre for Health Economics and Decision Science (SAMRC), Karen Hofman, says a 20% tax increase on sugary beverages will help reduce comorbidities, which have led to increased COVID-19-related deaths among the population.
She says the health incentive in this regard exceeds the financial incentive.
Former head of National Treasury’s Budget office, Micheal Sachs, says decisions regarding tax require the buy-in from the government, civil society, labour and business in order to be effective.
Sachs says taxes that don’t change public behaviour are more effective in raising revenue.