Sweetened Beverage Tax Procedure Should Be Halted
The Estonian Chamber of Commerce and Industry, the Estonian Food Industry Association, the Estonian Traders Association, and the Estonian Soft Drink Producers Association have approached various ministries regarding the plan to implement a tax on sweetened beverages. The associations are unanimously against the discriminatory tax targeted at a narrow product group because it has significant regressive socio-economic impacts.
In their appeal, the associations point out that although one of the tax's objectives is to improve public health, there is no indication that public health would actually improve—it could just as well have the opposite effect, making the measure at best ineffective and at worst harmful.
According to data from the National Institute for Health Development (NIHD) on population nutrition, sweetened beverages defined as the object of the tax constitute an insignificant part of the carbohydrates and free sugars consumed daily, already largely within the recommendations of the WHO. The implementation of the sweetened beverage tax might only reduce excessive sugar consumption per person by a couple of grams or, paradoxically, could increase due to substitute products.
The appeal finds that the tax, in its current form, serves only a fiscal purpose, carried out at the expense of the beverage and food industries and economically disadvantaged groups, ultimately failing to achieve either of its possible objectives: improving public health indicators or increasing tax revenue.
The anticipated tax revenue of 25 million euros is unrealistic
The appeal argues that the sweetened beverage tax lacks the expected positive impact on the budget, as the economic impact analysis relies on the (incorrect) assessment of the drafters of the bill, not on a model calculation based on Estonian market data and peculiarities that would consider the experience of recent years, including significant excise tax increases.
The government's expected tax revenue of 25 million euros is not realistic and does not consider other negative impacts that could change the overall tax collection, such as a decrease in taxpayer turnover due to reduced sales, potential re-emergence of cross-border trade, and, as seen in Denmark, the effects of smuggling.
The tax also has a deeply regressive impact, meaning that the health goal is primarily achieved at the expense of the quality of life of the economically less secure.
Industry's prospects will worsen
The associations highlight that the tax would harm one of the most important and competitive industrial sectors, particularly in an economic downturn exacerbated by geopolitical uncertainty.
The appeal also notes that the legislator disregards the growing tax and administrative burden on the taxpayer, resulting from higher VAT, a car tax affecting logistics, the upcoming waste and packaging reform, rising costs in packaging production, and overall industrial input costs, as well as increased fees to the state. This is in a context where the state has set high expectations for the beverage and food industry in terms of food security.
The bill's procedure should be terminated
The associations propose that the fast-track processing of the bill in its current form should be halted because it introduces a new tax that must comply with good legislative practice and drafting rules and requires the development of a preparatory action plan. Additionally, there is a lack of impact analysis and consideration of the competitiveness of the food and beverage industry when implementing a tax level worthy of a world record, as well as a socio-economic impact analysis that takes into account legal choices and a conceptual framework.