Catalonia follows WHO advice with taxes on sugary drinks

Barcelona (ACN).- Following the advice of the World Health Organization (WHO), the Generalitat has approved a new tax on sugary drinks, “because of the effects these drinks have on people’s health”. “Its principal aim is to encourage a change in consumption habits” as the WHO recommends. The new tax goes into effect this May 1, 2017 and it supposes between 8% and 50% of the product’s final price, according to the trade association AECOC. Nevertheless, consumers will not start noticing the price increase on the first day, but “in a week or 10 days, depending on the bars’ and stores’ stocks,” says the tax office’s secretary, Lluís Salvadó.

The law affects all soft drinks or sodas, fruit nectar beverages, sports drinks, tea and coffee drinks, energy drinks, sugar-sweetened milk, alternative milk options, milkshakes and milk with fruit juice, vegetable drinks, and flavored water starting this May 1, 2017. But the consumer will not notice the added tax during the first few days, since the tax only has an affect on the price from when the retailer buys the product from the distributor. And later, it is up to the last distributor in the chain to liquidate the tax on July 1. 

“The idea is that the consumer pays the tax (…) so that changes of habits are produced in the consumer,” said Lluís Salvadó in an interview with the Catalan radio RAC1, and he added that “WHO has identified that most of the bad habits are created with white-label brands”. Nevertheless, Salvadó stated “the aim of the government is to correct the habits of the producers and not just that of the consumers”. As a matter of fact, the tax office secretary stressed that some manufacturers have already considered reducing sugar in their drinks in order to reduce the tax impact on the final price of their product. Thanks to the law, a yearly tax collection of 41 million euros is expected from this new tax. 

On the other hand, companies from the sugary drinks sector are against this new tax. The CEO of AECOC, José María Bonmatí, said to the Catalan News Agency that manufacturers and distributors are not in favor of this tax, since they consider it “discriminatory, since it only penalizes some products, it creates legal insecurity in the taxpayer, and it distorts competition and market unity”.

Bonmatí added that “health matters are not only solved through a tax law point of view”. As an example of their unhappiness, the representative from the trade association stated that the sector has already modified their supply over the past years and, currently, 25% of the drinks in this range “are already sugarless or don't have calories”, as the boom in “light” drinks shows.

In the meantime, the Catalan government is willing to impose taxes on other products that are high in fat or sugar in addition to the tax on sugary drinks. The tax office secretary defended that it is “consistent” to apply the tax to these other products, but it has to be “done well”. In this sense, it will be applied when the “conditions” are appropriate. Salvadó further explained that many European countries have studied the possibility of expanding the tax to all sugary products and, at the moment, they have arrived at the conclusion that they are “mature enough to add the tax to sugary drinks, but not to other products”. Anyhow, “there is a desire to move forward” in this strategy and these new taxes could be imposed in around four or five years.