In a move to try and decrease sugar consumption in Newfoundland and Labrador, the first sugar sweetened beverage tax in Canada has now been implemented by the provincial government. As promised in October 2021, a tax of 20 cents per litre now applies to all drinks with added sugars, on top of the existing provincial sales tax. This new tax, in effect as of September 1, is expected to bring in a projected $9 million a year in revenue for the province to go towards physical activity, prenatal and infant nutrition initiatives, and school food programs.
According to Finance Minister, Siobhan Coady, Newfoundland and Labrador spends 2.8 per cent of its total annual food and beverage expenditures on sugar-sweetened beverages, the highest amount in Canada.
The new tax will apply to beverages like pop, sweetened fruit juices, energy drinks, fountain sodas, slushies, and iced tea, as well as those sweetened with corn syrup, fructose, and agave syrup. Items like chocolate milk, diet drinks, infant formula, and yogurt drinks are exempt from the tax.
These types of levies already exist in other countries, primarily targeted at manufacturers. In 2018, the soft drink industry levy was introduced in the UK. This resulted in a 30 per cent lower sugar consumption per household, with a consistent volume of sales. Rather than deterring consumer purchases, manufacturers simply started adding less sugar to their products.
As the Retail Council of Canada confirms, the sugar sweetened beverage tax will be primarily collected at the wholesale level. However, if the product is purchased directly from the manufacturer, then the retailer is responsible for collecting and remitting the tax.
According to Sylvain Charlebois, director of Agri-Food Analytics Lab at Dalhousie University, one of the main failures of this type of tax is that the cost is often absorbed at the supply chain level. “You won’t necessarily see a difference in price [at] retail because margins are very high with these products,” he says.
Having said that, though, restaurants and retailers may be faced with a dilemma of deciding whether to absorb this additional cost, and potentially lower their profit margins, or to pass the additional cost onto the consumer.