Print Submission Page 1 of 4 00835?17: Sugar Tax Options Budget 18#4 To: Minister Author: Ciaran Conroy Status: Completed Owner: Ciaran Conroy (Finance) Purpose: For Discussion Reviewers: Gerry Kenny,John Hogan Division/Of?ce: Tax Division Decision By: Final Comment Ciaran yes we will do this. As outlined in section 12, at a rate similar to the UK. Only thing that will stop this is it not happening in Please move ahead with it. Action Req uired Budget 2018 - Options Around Sugar Tax Executive Summary In Budget 2017, in line with the commitment made in the Programme for Partnership Government, the then Minister for Finance announced his intention to introduce a tax on sugar?sweetened drinks in April 2018. 0 The Budget speech also provided for a Public Consultation which garnered 30 submissions. To assist with the development of the tax, a steering committee was established and extensive stakeholder engagement took place throughout the process. Officials from this Department are also engaged with DG Competition to ensure that, once introduced, the sugar tax will not infringe State aid legislation. - Should the ongoing engagement with DG Competition fail to get suitable assurances, it may be preferable to formally notify the potential State aid to the Commission. 0 Options around the tax are included below. Comments - (15/09/2017 15:28:39) Margaret Fitzgerald: Submitted to the Minister's Of?ce by Margaret Fitzgerald on behalf of the Secretary General - (15/09/2017 14:29:42) John Hogan: Minister: The submission provides some consideration of the issues connected with the proposed introduction of a sugar tax from 1 April next. Should you con?rm your intention to proceed, we will intensify our discussions with DG Competition to address any State aid concerns. 08/03/2018 Print Submission Page 2 of 4 Detailed information Process to Date 1. In Budget 2017, in line with the commitment made in the Programme for Partnership Government, the then Minister for Finance announced his intention to introduce a tax on sugar- sweetened drinks in April 2018. This announcement was to coincide with the introduction of a similar tax in the UK. 2. The Budget speech provided for a Public Consultation inviting interested stakeholders to make submissions in relation to the design, scope and practical implementation issues of the tax. The consultation process, which ran from Budget night to 3rd January 2017, garnered 30 submissions, the majority of which came from the health sector and soft drinks industry. 3. To assist with the development of the tax, a steering committee was established in February and extensive stakeholder engagement took place throughout the process. 4. Building on the Department of Health rationale and submissions received as part of the public consultation, an implementation team was established comprised of of?cials from this Department as well as from Revenue. The implementation team developed, in conjunction with industry, the necessary framework to establish the tax which is designed to be as effective as possible, as fair as possible, and impose the least administrative burden on business. 5. The scope of the tax includes all water based drinks with 5 grams of added sugar per 100ml or greater, with a second tier kicking in at 8 grams of added sugar per 100ml. Pure fruit and vegetable juices are exempt, however once sugar is added the whole sugar content becomes liable. All milk based products are exempt on the basis of the nutritional bene?ts these products offer especially in relation to calcium and protein. 6. The tax as designed will make the point of taxation the ?rst supply in the State. This is designed for administrative simplicity in a sector which employs a wide variety of supply chains. Revenue are ?ne tuning details of how the tax will work in practice, including the development of an export relief scheme to refund the tax on goods which are exported following a ?rst supply in the State. State Aid Consideration layouts/ 08/03/2018 Print Submission Page 3 of 4 7. Of?cials from the Department are also engaged with DG Competition to ensure that, once introduced, the sugar tax will be free from State aid. This engagement remains ongoing, with DG Competition twice seeking and receiving further information and academic evidence to justify the rationale for the tax and ensure compatibility with the single market and State aid rules. Of?cials are due to meet with DG Competition in Brussels in early September to address any outstanding issues. 8. It is hoped that any remaining obstacles with DG Competition will be fully addressed prior to the introduction of the tax in April 2018. In the absence of assurances from DG Competition in relation to compatibility with the single market it is not possible to commence the tax on sugar sweetened drinks without exposure to litigation. 9. In the circumstances, should the ongoing engagement with DG Competition fail to get suitable assurances, it may be preferable to formally noti?l the potential State aid to the Commission and receive an assurance of the compatibility of the proposed tax with EU rules. 10. While the soft drinks industry have engaged constructively with the implementation team, they have continually indicated that they are fundamentally opposed to its introduction. Options for Budget 2018 11. The sugar tax has been developed in line with the Department of Health recommendations regarding rates and scope of application, namely: Sugar sweetened drinks with a total sugar content of over 8g of sugar per 100ml and between 5 and 8g of sugar per 100ml. This is consistent with a similar proposed tax in the UK. 12. The UK have announced that the taX will be applied to sugar sweetened drinks with total sugar content of over 8g of sugar per 100ml at 24p per litre and at 18p per litre for sugar sweetened drinks between 5 and 8g of sugar per 100ml. 13. Similar rates in Ireland would be 300 per litre on drinks with over 8g of sugar per 100ml and 20c on drinks with a sugar content between 5 and 8 per 100ml. The previous Minister for Finance indicated that in order to avoid market distortion tax rates would be similar in both jurisdictions. 14. It is extremely dif?cult to estimate accurately the yield of a tax on sugar sweetened drinks due to continued reformulation by the soft drink industry. In addition, a number of multiples have indicated that they will reformulate own brand products to avoid exposure to the tax. Should you introduce a tax on sugar sweetened drinks at the above rates it could generate in the region of ?40m in a full year and ?30m in 2018. 08/03/201 8 Print Submission Page 4 of 4 15. You may wish to speak with of?cials. Pros - Makes good on commitment to introduce tax on sugar sweetened drinks in the Programme for Partnership Government; - Final policy intervention in Department of Health's strategy to tackle obesity by reducing sugar consumption; - Aligned with the UK who are introducing a similar tax; - Raises much needed revenue; Cons - Could be subject to litigation; Impact on soft drinks manufacturers; - Administrative dif?culties for Revenue introducing tax on product not governed by the Excise Control and Movement System; - Impact of additional tax burden on low income families; Related Submissions There are no related Submissions. User Details Users with access to Submission Read receipt list Ciaran Conroy (Finance) Ciaran Conroy (Finance) Gerry Kenny John Hogan Gerry Kenny Sub_F IN Sec Gens Of?ce John Hogan Ministers Of?ce Margaret Fitzgerald Helena Quane Stephen Lynam Deborah Sweeney Minister Donohoe 08/03/2018