U.K. puts surprise tax on sugary drinks

The U.K. government on Wednesday unveiled a surprise levy on sugary drinks, setting up a new battleground between the global soft-drinks industry and public-policy makers aiming to curb sugar intake.

While the U.K. is a relatively small market for global drink makers, executives have worried about the precedent such a move could set.

France, Mexico and Chile already have rolled out similar levies in recent years while India, Indonesia, the Philippines and South Africa are considering them. A number of states and municipalities in the U.S. also have toyed with the idea.

U.K. Treasury chief George Osborne announced the new tax, which will be introduced in two years, in his 2016 budget statement. He estimated the measure would raise $735.8 million in its first year, with receipts subsequently declining as makers reduce sugar content.

The U.K.’s Office for Budget Responsibility calculated that on the basis of the government’s revenue target, the sugary-drinks levy would end up imposing unit charges of 18 pence or 24 pence a liter, “which we expect to be passed entirely onto the price paid by consumers.” The money will be used to fund more sports in schools.

Industry groups sharply criticized the move.

“We are extremely disappointed by today’s announcement,” said Ian Wright, director-general of the Food and Drink Federation, a U.K. trade body. “The imposition of this tax will, sadly, result in less innovation and product reformulation, and for some manufacturers is certain to cost jobs.”

Shares of Coca-Cola Co. KO, -0.42% and PepsiCo Inc. PEP, -0.32% on Wednesday dipped 0.4% and 0.3%, respectively, in New York trading. Britvic PLC BVIC, -1.29% — which sells Pepsi’s drinks in the U.K. and Ireland and has its own soft-drink brands, including Tango and J2O — was down 1.3% in London.

Source: The Wall Street Journal