Sugar tax: Ireland to postpone introduction for another month

The Irish government will delay the country’s planned sugar tax for another month so that it can receive ‘state aid approval’ from the European Union.

Ireland’s Department of Finance released a statement saying the tax would now come into force on 1 May, allowing the Irish government time to complete “the necessary administrative processes in relation to state aid approval”.

The country had planned to introduce a tax on sugar-sweetened beverages on 6 April – the same day that a similar tax, announced 6 months earlier, comes into force in the UK.

The Irish tax has broadly similar rates and exemptions to the UK tax, which will not impose a levy on dairy drinks or pure fruit juices. Other soft drinks with 5g of added sugar per 100ml will incur a charge of £0.18 per litre, while drinks with 8g of added sugar or more will face a charge of £0.24 per litre.

The Department of Finance continued: “The sugar-sweetened drinks tax is the first of its kind to be reviewed by the European Commission and will provide a benchmark for state aid decisions in this area. Key stakeholders have already been informed of this development.

“The sugar-sweetened drinks tax is designed to help tackle growing levels of obesity. The World Health Organization recommend limiting consumption of sugar-sweetened drinks as part of a strategy to tackle obesity. This tax is one of a suite of measures being implemented as part of an overarching policy framework to address this issue. It is hoped that the introduction of a financial barrier on sugar-sweetened drinks will result in reduced consumption by incentivising individuals to opt for healthier drinks in tandem with providing motivation for the soft drinks industry to reformulate by reducing added sugar content and delivering healthier products.”

What is state aid?

The European Union (EU) puts tight controls on state aid – the practice of businesses receiving an unfair advantage as a result of state funding. In general, all state aid is banned because of its anti-competitive effects but, in some cases, is allowed by the EU because its benefits outweigh its costs.

The Irish government will argue that the health benefits of sugar legislation far outweigh the bias that enforcing it will likely create.

But the country will be keen to avoid a repeat of its tax affair with technology giant Apple. In 2016, the republic was found to have unfairly favoured Apple in its tax policy, and was ordered to collect €13 billion’s worth of backdated taxes that the California-based multinational had avoided.

The UK and Ireland are not the only countries taking fiscal action on obesity this week. South Africa began enforcing a sugar tax on 1 April, and others are expected to follow suit – including Thailand, which is slowly phasing in sugar legislation to allow manufacturers to adapt.