Sugar tax set to be introduced in budget due to obesity concerns

Minister for Finance Michael Noonan is to announce a sugar tax in next month’s budget but may delay the implementation of the levy for a year until 2018.

Senior sources in Government have said they expect Mr Noonan will make good on the commitment in the Programme for Government to introduce a new tax on sugar-sweetened drinks.

It will follow similar moves in the UK, which has also delayed the take-up date for the new tax until 2018.

The tax is motivated by concerns over rising levels of obesity in Ireland, especially among children. Ireland has one of the worst records in the EU in recent years in tackling the issue of higher numbers of overweight adults and children.

A quarter of Irish adults are obese and more than one third are overweight. In Ireland, six out of 10 men, and five out of 10 women, are overweight or obese.

The decision to introduce the tax has been fiercely resisted by the soft beverage industry, which has claimed it will not tackle the problem.

In a report last month, the Irish Beverage Council claimed it would increase a household’s average spend by €60 each year. It also said companies in the Republic would lose out to Northern-based companies with an overall cost of €60 million to the industry.

‘Sin’ taxes

It argued that food-based and drink-based “sin” taxes were regressive and had a disproportionate effect on low-income households.

"A sugar tax may be populist, but it is simply not supported by evidence," IBC director Kevin McPartlan told The Irish Times.

However, the IBC’s concern over a disparity between prices, North and South, will be assuaged if the tax is not imposed until 2018.

A senior Government source said the tax would generate some income for the State but that this was not its primary purpose. Besides, if its operation was delayed until 2018, it would not affect the budgetary calculations for 2017.

The Programme for Government has also committed to an increase in taxes on tobacco, the establishment of a new “rainy day” fund, the gradual phasing out of the Universal Social Charge and the full implementation of the Lansdowne Road Agreement.

The Government’s so-called fiscal space for 2017 is €900 million, of which €600 million is committed to spending and €300 million will be earmarked for tax savings. Mr Noonan may be able to use the healthy exchequer returns for 2016 as leverage to gain more leeway for spending in the budget.