Soft drinks industry warns sugar tax will lead to Border smuggling

The smuggling of soft drinks across the Border from Northern Ireland will cost the exchequer tens of million of euro each year in lost revenue if a tax on sugary drinks is introduced next year, a lobby group representing the soft drink sector has claimed.

A new tax on sugar-sweetened drinks is due to come into effect in April 2018 in an effort to tackle spiralling rates of obesity. The Government is likely to outline the details in the October budget, but the Irish Beverage Council is continuing to fight a rearguard action aimed at blocking the measure.

The group, which represents soft drinks companies, has published its prebudget submission under the title “All cost – No benefit”, calling on Minister for Finance Paschal Donohoe to defer the tax.

Its submission suggests that the combination of cross-Border shopping, uncertain all-island trade post-Brexit and the increasing cost of the weekly shop through new taxes threatens to facilitate a “perfect storm”.

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"With the euro in our pockets now buying more against sterling, Irish shoppers are increasingly heading North," said the council's director, Colm Jordan. "The Minister for Finance must defer his plan for higher taxes on our weekly shop. We are forecasting that 11 per cent of sugar-sweetened drink sales will be lost to cross-Border shopping and the unofficial grey market. That amounts to a €30 million loss to our economy in a full operating year of the sugar tax."

He said that, by contrast, the soft drink tax would only raise €40 million and claimed that confusion about the financial benefits of the tax were rife.

"In the past 34 months the Department of Finance has changed how much they predict the tax will raise on five separate occasions. The prediction fell 53 per cent between April and July alone. This shows there is uncertainty about how the tax will work," Mr Jordan said.

Mr Jordan said his organisation accepted the Government’s “sincerity in addressing the complex societal issue of obesity” and stressed that it was “fully committed to playing our part”.

"While childhood obesity rates continue to increase, daily consumption of sugar-sweetened soft drinks among 11-, 13- and 15-year-olds fell by 70 per cent between 2002 and 2014, according to the World Health Organisation, " he said.

“With less sugar in soft drinks and fewer children drinking sugar-sweetened drinks daily, the singling out of sugar-sweetened drinks is totally unjustified. This must be acknowledged with a deferral.”