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Deferral of introduction of sugar tax to 1 May not sufficient to allow businesses to adequately prepare – Deloitte
Commenting on the deferral of the introduction of the new sugar tax from 6 April 2018 to 1 May 2018, John Stewart, Director, Tax, Deloitte commented:
“The Department of Finance has announced that the new sugar sweetened drinks tax, which was due to be introduced on Friday 6 April, is now deferred until Tuesday 1 May to allow for completion of the administrative processes relating to state aid approval. However, this is still a relatively short period of time for businesses to prepare as guidance on the operation of the tax was only issued on 20 March.
“This presents businesses with a very short timeline to get to grips with the tax and understand, not alone the rules that apply to the tax, but also the commercial implications for their business. Matters are further complicated by the fact that the introduction of the tax has been deferred and cannot be introduced until it gets approval by the European Commission. Our view is that an introduction date of 1 July would be more appropriate.”
The sugar tax, alongside an increase in the rate of VAT on the use of sunbeds and excise duty on cigarettes and other smoking products, is one of the taxation measures used to drive improvements in public health in Ireland. The Department of Finance has estimated that the sugar tax alone should bring in additional tax of €40 million in a full year. The purpose of the sugar tax is to help tackle obesity by incentivising consumers to opt for healthier drinks while also encouraging the drinks industry to reduce the added sugar content of drinks and deliver healthier products.
“The introduction of this tax is a welcome measure to help tackle Ireland’s obesity problems. It is important that the introduction of any new tax is as practicable as possible to ensure that businesses have adequate time to prepare and consider the implications, and so help in achieving the desired changes. Furthermore, the process by which taxes are introduced can help in ensuring that the desired funds are generated for the Exchequer in a cost efficient and timely manner,” observed Stewart.
There are a number of administrative processes businesses will now have to go through including registering for the tax as a supplier - with a separate registration required for certain exporters, identifying all the products that will be subject to the tax and those that are covered by exemptions, and determining the rate that applies to those products, in addition to maintaining ongoing records as required by the Revenue, completing additional tax returns every two months and submitting separate claims for refunds of sugar tax on exports.
In addition to the short timeframe for the introduction of the tax, the time limit for claiming back refunds of the tax is only six months. By contrast, the time limit for VAT and other tax refunds is generally four years.
Stewart commented: “Six months is a very tight and unfairly short time frame for the recovery of any tax. We would call on the Minister to extend the time limit to four years, as is the case with most tax refunds, to ensure that businesses, which have to bear the burden of collecting the tax, can get the refunds which they are due.”
The sugar tax will apply to non-alcoholic, water-based and juice-based drinks in ready to consume or concentrated form which have added sugar content of 5 grams per 100 millilitres and above. It will not apply to pure fruit juices that do not contain added sugar and dairy products. The rate of tax will be based on the sugar content. Where the sugar content is 5 grams or more but less than 8 grams per 100ml the tax will be at 20 cent per litre. Where the sugar content is 8 grams or more the rate will be 30 cent per litre. In practical terms it has been estimated that this will result in an increase in the cost of a can of soft drinks of 10 cent.
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