The SBL was initially announced by National Treasury and the Minister of Finance in the February 2016 National Budget speech. After an extensive public consultative process with all relevant stakeholders, the SBL was formally legislated and forms part of the Rates and Monetary Amounts and Revenue Laws Amendment Act, No 14 of 2017 as passed in Parliament on 5 December 2017.
The rate pursuant to the SBL is fixed at 2.1 cents per gram of the sugar content that exceeds 4 grams per 100ml. The first 4 grams per 100ml are therefore levy free. In practice, SARS states that it will be paid in addition to any other customs and excise duty payable and imports will not be declared on separate bills of entry.
Importantly, sugar content means both the intrinsic and added sugar and other sweetening matter. Sugar content will be calculated on the sugar content as certified on a recognised test report from a testing facility accredited with the South African National Accreditation System (SANAS) or the International Laboratory Accreditation Cooperation.
In the absence of such a valid test report, a deemed sugar content of 20 grams per 100 ml will be assumed. For powder and liquid concentrates, sugar content will be calculated on the total volume of the prepared beverage.
The next step in the rolling out of the SBL is the licensing and registration of those relevant manufacturers and producers who will be liable to pay it over to SARS. SARS has announced that the licensing and registration of manufacturers of sugary beverages will take place from February 2018. Importantly, only commercial manufacturers that produce sugary beverages with a total annual sugar content in excess of 500kg per year need to be licensed and pay the SBL. SARS states that non-commercial producers below this threshold will be expected to register but will not be subject to the SBL.
While the stated intentions behind the introduction of the sugar tax are certainly to be commended, it will be interesting to monitor whether the introduction of the tax will have any actual material effect on consumer use patterns and concomitantly on the reduction of non-communicable diseases (NCDs) which it wishes to tackle. In this regard, the Policy Paper issued by National Treasury on 8 July 2016 titled “Taxation of Sugar Sweetened Beverages” expresses the opinion that it should have a positive effect and states as follows:
Globally, fiscal measures such as taxes are increasingly recognised as effective complementary tools to help tackle the obesity epidemic at a population level. Taxes/levies can play a key role in correcting for market failures and act as a price signal that could influence purchasing decisions of consumers.
It should be noted that many countries have introduced a similar tax with mixed results and we will have to wait and see whether the “sugar tax” has the intended positive effect in South Africa or whether it will merely act as another mechanism for revenue collection. Further information regarding the SBL can be found at this link on the SARS website: