Planned UK sugar tax will collect £245m less than expected – OBR

The amount the UK government can expect to raise from its planned soft drinks levy has been further reduced by £105 million, according to The Office for Budget Responsibility.

In a report published this month, the OBR said it has been informed by HM Revenue and Customs that significant revisions to the data underpinning the estimated yield suggest the size of the tax base was ‘considerably overestimated’.

Mintel is said to have overestimated the level of consumption of such drinks being consumed in pubs, restaurants and cafes, leading the OBR to revise the amount raised from the impending tax – which is supposed to be introduced in April – to £275 million.

The sugar tax was announced in 2016 as a means of raising £520 million through two tax bands – one for sugar content above 5g/100ml and a second higher band for sugar content above 8g/100ml. 

However, in the spring Budget earlier this year, the government lowered its estimate of the value of the tax to £380 million because producers already began reformulating sugar out of their drinks.

Chancellor Phillip Hammond said that, despite the lower revenue forecast, the government would continue to fund £1 billion in additional spending for UK schools, which the sugar tax was intended to pay for. 

After the lower tax yield was revealed in spring, there were questions raised within the industry about its effectiveness.

Director general of the British Soft Drinks Association Gavin Partington said: “We support the need to address the public health challenge the country faces, but it’s worth bearing in mind that there is no evidence taxing a single product or ingredient has reduced levels of obesity anywhere in the world.”

Last month Ireland announced that as of April next year it will introduce a sugar tax of 30c a litre on beverages with more than 8g of sugar.