Beat it

Beat it

Taxing sugar, not alcohol, will lead to a healthier way of life




by Michael Fridjhon, 

IN MID-NOVEMBER the Treasury hosted a workshop aimed at engaging with stakeholders on the subject of alcohol excise. It included speakers from the World Health Organisation, academia and representatives from the liquor industry.
From the first session it was clear the purpose of the event was to excoriate the demon drink as a prelude to justifying more onerous taxes on the sector.
This much was evident from the way the agenda had been drafted: representatives from organisations dealing with the consequences of alcohol abuse were up first, setting the tone for the discussion.
Economists "showed" that revenues from alcohol taxation were insufficient to "recover" the full costs to society from the damage wrought by alcohol abuse. One even suggested that the value added tax earned from liquor sales should be discounted from the industry’s "contribution" because, in the event of consumers giving up drink, they would be spending the money on other goods and services.
In short, the event served as window-dressing for what will be an ever-tightening tax squeeze to feed the insatiable cash needs of a profligate government.
Supporting the implicit view that moral right was on the side of higher alcohol imposts, the Treasury’s independent advisers constantly referred to the gains — in public health terms — achieved as a result of the campaign against tobacco products waged over the past two decades.
They were deaf to the arguments that the massively increased tobacco taxes had driven a significant percentage of total consumption underground, and they were in denial that raising the excise would fuel the burgeoning illicit liquor sector. It was apparent that they were not going to see that policing had played a key role in limiting tobacco usage: with the onus on restaurateurs and shopping centre management to control smoking in public places, the job was being done for the authorities — no one was relying on the police to play a role in modifying human behaviour.
The term "sin tax" has been in use for so long that it’s acquired a kind of legitimacy. Why should certain human indulgences be thought of as sinful, and why, for that matter, should a puritanical view of the universe be allowed to prevail in a secular state? We don’t impose a tax on polygamy, nor are there any particular tax benefits for ascetics. Neutrality in terms of choice, alongside freedom to choose, is a basic tenet of our constitution.
Of course, freedom to do what pleases you comes with the responsibility that it should not harm others — and this is where the concept of a sin tax flourishes, courtesy of some conveniently misplaced logic. The idea that your choice –— to smoke or consume alcohol — comes with a price to society is used to imbue the tax with a sense of moral righteousness. The defect in the reasoning is this: though you chose to drink (or smoke), you did not necessarily bring harm to the community. To the extent that your choice has long-term consequences for you, you can elect to bear the costs, or to become a victim of your own poor choice. If smoking and/or drinking should harm your health, either you pay your medical bills or you pay the price in mortality. If the Treasury has a role at all in this, it must surely be to modify self-destructive behaviour by making goods which are bad for you less affordable. This, in theory, is the role played by increased taxation on tobacco products.
The sin tax lobby chooses not to see this. It argues that the very fact that you have made this choice imposes a cost burden on society, and its key argument rests on the unintended consequences of irresponsible actions. You drank — and then drove a car, and caused an accident, and therefore (so the logic goes) all drinkers must pay for your failure to comply with the law.
Insofar as smoking is concerned, the reasoning is even more specious. You smoked — got cancer or emphysema — and now society must pay for your palliative care. Neither of these two positions stands scrutiny in our society, and only the latter would have any validity in a welfare state.
Insofar as the drink-driving issue is concerned, your offence was not that you drank alcohol, but that you then took to the road. Since this is an action subject to legal sanction in its own right, the mere fact that it is such a significant issue in our society is a measure of the failure of the state to police the legislation created precisely to anticipate this eventuality.
In fact, to the extent that alcohol-related accidents are included in the so-called "cost of alcohol in our society", what is being measured is the government’s inability to perform its basic function (which is to protect its citizens, rather than to collect tax efficiently).
Debiting the liquor industry for the state’s shortcomings is a little like blaming rape victims for being in the wrong place at the wrong time, rather than pursuing the rapist and dealing with gender violence.
The moment you succumb to the disingenuous argument of the Treasury and its acolytes you must accept its application across a host of industries. Should motor car manufacturers be held liable for the death toll on the roads? Should employers who pay generous wages be held liable for Monday absenteeism? If the state wishes to impose penalties wherever there are cost implications for the economy, surely it should offer incentives to municipalities to improve traffic efficiency. Anyone who has been unnecessarily delayed by broken or unsynchronised robots would appreciate the intervention of the fiscus in changing the cavalier disregard of the Johannesburg Road Agency for the chaos of our roads.
So what would have been the smarter way for the Treasury to approach this, one that would widen the tax net, improve the average health of our citizens, and effect a change in behaviour which would bring a quantifiable benefit to the country?
Some time ago I put a proposal to the Treasury for a tax that was easy to collect. I suggested an excise on sugar in all its forms — sucrose, fructose and dextrose (all of which can be used to produce alcohol, legally and illegally). The rate of taxation could be calibrated in proportion to the amount of sugar necessary to yield the requisite alcohol in the various beverage classes.
In other words, alcohol excise would be based on both the alcohol (transformed sugar) and the residual sugar. "Alcopops" and ready-to-drink beverages — which are gateway beverages for teenage drinkers and where the sugar and the alcohol together would bump up the excise — would suddenly be more highly taxed.
By focusing on the key component that produces alcohol, and extending it to cold drinks, fruit juices and all foodstuffs to which sugar is added, from breakfast cereals to marinades, the taxman would open up a limitless revenue source, have an opportunity to modify what people consume, and make it vastly more difficult to produce illicit alcohol. This would also help to address public health issues like obesity and diabetes as well as alcoholism, and contribute (to the extent that people are economically rational) to a healthier way of life for all South Africans.
However, judging from the outcome of the workshop, it seems the Treasury was merely paying lip service to the idea of using taxation to encourage better lifestyle options. It’s really only about the money. If you always do what you always did, you always get what you always got.

• Fridjhon is visiting Professor of Wine Business at the Graduate School of Business, University of Cape Town.