- The following statement was released by One Bermuda Alliance Senator Nick Kempe on Saturday, May 4, 2019
The PLP Government has framed the sugar tax as a financial disincentive that will modify behavior, reduce the incidence of diabetes and therefore contribute to reducing the overall cost of health care in Bermuda.
I do not believe that the tax as it stands will successfully achieve any of those outcomes. Whilst I voiced my concerns during the Senate debate, I feel it would be beneficial to the national conversation to expand upon these concerns in writing as in its present form the sugar tax is simply raising the cost of groceries. The sugar tax falls short of its intended purpose in three major ways: method of calculation, protection of children and concessions for small business.
Method of calculation: Sugar is now essentially being levied an excise tax in the same fashion as tobacco and alcohol. Unlike alcohol (which is taxed per litre of alcohol), goods containing sugar are taxed based on their purchase price when imported into Bermuda. This means that healthier options with less added sugar, higher quality ingredients and a higher starting price point are being taxed more than candy bars with far more sugar, almost no nutritional value but a lower starting price point.
For example, a 40g Kind bar with 4g of sugar and an import purchase price of $1.18 will now pay $0.89 in sugar tax (duty) whilst a 40g Kit Kat bar with over 20g of sugar with an import purchase price of $0.66 will only pay $0.50 in sugar tax. [Note: import purchase prices are approximations inferred from final retail price.]
The real effect of levying a sugar tax on purchase price and not sugar content is that the healthier alternatives which are generally more expensive to begin with may simply become unattainable. The effective sugar tax on the Kind bar in the above example is $155/kg whilst the effective sugar tax on the KitKat bar with five times the amount of sugar is a mere $16kg.
Protecting children: A 2014 Steps to a Well Bermuda survey of over 1,200 adults found 74 percent of those interviewed to be overweight or obese. That same survey estimated a prevalence of diabetes in Bermuda to be 13 percent, almost 50 percent greater than the global average.
Given Bermuda’s staggering levels of obesity and diabetes, one would think that extra attention would be given to ensuring behaviours are “corrected” during our children’s formative years before they become engrained problems as adults. Instead, sugary breakfast cereals have been exempted from the sugar tax and fruit juices no matter how sugary are only paying 5% duty. (Also, remember how Government promised to earmark a percentage of the tax towards health initiatives. We have heard nothing since that now broken promise was made).
There is a wide range of sugar contents in breakfast cereals. Shredded Wheat and Quaker Oats both have about 1g of sugar per 100g of cereal. Frosted Flakes on the other hand has 37g of sugar per 100g of cereal. Clearly not all cereals are equal as relates to sugar content. The irony is that cereals were exempted from the sugar tax because Government recognises that the present tax does not take differences in sugar content into consideration (see my above criticism of method of calculation).
Bottled fruit juices may sound healthy, however most are served in 10-12oz portions that exceed the recommended serving size of 4oz by threefold (American Institute for Cancer Research). In many cases, bottled fruit juices remove the insoluble fiber that would have been consumed had the equivalent fruit been eaten whole. Most orange juices contain about 10g sugar per 100ml, which is equivalent to the amount of sugar in Coca-Cola.
Many grape juices contain double the amount of sugar contained in Coca-Cola.
Small business relief: Relief for small business comes in the form of a CPC code which would give small business duty relief on their Bermuda Customs Declaration. The problem, of course, is that most small businesses don’t ship in their own sugar directly, but rather order through a wholesaler. The wholesalers will have already paid duty on the sugar when they originally imported. It will be interesting to see if any of the purported benefits for small businesses materialise as it would cost the wholesalers time and money to submit any kind of refund application with HM Customs.
Solutions: A 75 percent tax is excessive and as structured simply drives up the cost of living in Bermuda without actually incentivizing healthy behaviours. Mexico has had success driving consumption towards less sugary alternatives with a mere 10% tax on the purchase price of Sugar Sweetened Beverages containing more than 5g of sugar per 100ml.
England adopted a similar approach but added a second more expensive band for drinks with over 8g of sugar per 100ml. Another method that might work in Bermuda could be to tax the grammes of added sugar directly which is how alcoholic beverages are taxed.
Available data on childhood obesity in Bermuda is somewhat dated; however current figures are due in June of this year from a school assessment survey with numbers from the OBA’s Premier’s Youth Fitness Program. The International Diabetes Federation determines that up to 80% of Type 2 Diabetes (once considered adult-onset but now becoming more common in children) can be prevented with the adoption of healthier lifestyles. There is absolutely no reason that breakfast cereals and juices should be exempted from a sugar tax that correctly targets the more sugary options whilst maintaining the price of the healthier alternatives.
In summary, whilst the sugar tax may have contributed to elevating the conversation surrounding food choices the implementation entirely misses the mark. The tax does not actually target the most sugary options, does even less for food and drink consumed most by children and only pays lip service to small business.
You cannot blame the public for seeing this tax as simply a money grab that increases the cost of living.
I will close on one last example of unintended consequences. Everywhere coffee is served, sugar is offered at no extra charge. As the cost of sugar packets went up, businesses increased the cost of coffee to protect their margins. The person that drinks their coffee without sugar and the person that drinks their coffee with 7 packets of sugar now both contribute equally to the increased tax. However neither is incentivized to consume less sugar, just less coffee perhaps as it now costs more.