Soft drink manufacturers are preparing to start a legal action against the UK Government for proposing a controversial sugar tax.
The sugar tax was announced in George Osborne's latest Budget Report, published by the Office for Budget Responsibility. It mandates an additional 24p a litre to soft drinks with high sugar contents. According to the Guardian's report, this could not only affect the soft drink companies, but it could also mean higher prices for the consumers.
An inflation in the market is expected when the sugar tax will be implemented in 2018, costing the government £1bn to actualize the law. The extra cost will come from a predicted rise in accrued interest that the government will have to pay on debt, in relation to the increasing rate of inflation. The tax could be raised to £520m in its first year of implementation, but this is far less than the cost of introducing the tax levy.
The sugar tax affects companies such as Coca Cola, Irn-Bru, Ribena, and Red Bull, that contain more than eight grams of sugare per 100 millilitres; that is more than one teaspon off added suger for every 100 millilitres. To consumers, this means that 8p will be added to the price of each can.
Those companies like Fanta, Sprite, Dr Pepper, and Indian Tonic Water, with sugary drinks above 5 grams per 100 millilitres, shall have to add around 6p to the price of a can or bottle, as stated in a report by the Daily Mail.
When the sugar tax was announced in the Budget, the share pricess of major soft drinks companies autamatically dropped. These companies are now looking at options on how to respond to this dilemma.
According to the Express, they could sue the government through the European courts on the grounds that they are discriminated from drink companies that produce like milkshakes and pure fruit juices - these drinks are considered healthier because of its milk content, despite its high sugar content.
Coca-Cola Great Britain's spokesperson said: "We need to know more about the levy and how the government plans to implement it. Once this is clear to us, we'll decide on what steps to take as a business and how best to continue the work we have done to help people consume less sugar and calories from our drinks."
The government defended the tax. Osborne said in the Independent's report, "Let us tax the things we want to be reduced, not the things we want to encourage."
A HM Treasury spokesperson said: "He introduced a new levy on the soft drinks industry to pay for a doubling of dedicated sport funding for every primary school in the country, a huge expansion of breakfast clubs to ensure that every child gets the best start to the day, and new funding for a longer school day."
