November 30, 2020

The VAT hike on sugary drinks will destroy up to 6,150 jobs




The increase from 10% to 21% VAT that the Government intends to carry out on sugary and sweetened beverages, as stated in the budget plan sent to Brussels, would have a negative effect on the sales of the entire agri-food chain, as well as its contribution of Gross Added Value (GVA) and employment. According to a report prepared by the consulting firm PWC up to 6,165 jobs would be destroyed, while direct billing would be reduced by 370 million euros, with a great impact on the distribution channel. The impact on the GVA would be up to 344 million euros, the agricultural sector and the agri-food industry being the most affected. “There would be a drop in demand and the value chain,” explained Anna Merino, strategic director of PWC.

The Government intends raise up to 400 million euros with this tax increase, although the Executive emphasizes that the intention is none other than to reduce sugar consumption in the population and promote healthier habits in it to reduce obesity. However, the PWC report notes that “scientific evidence based on the experience of countries that have implemented taxes on food and beverages with the aim of improving health shows that the fiscal policy used to solve the obesity problem is limited, inconclusive and they have even eliminated it due to the negative effects it has on economic activity, employment or equity ».

In addition, it shows that in France and Mexico, where they imposed this tax a few years ago, the results have not been as expected. While countries like Denmark or Slovenia have ended up suppressing it. In addition, in Spain this tax has already been established in Catalonia for years, although by sections depending on the amount of sugar. Even so, from the sector it is recalled that in the region it has had a null effect on collection and on consumer habits.

The companies in the value chain of the agri-food chain criticize that the measure is purely tax collection and insist that there are other better ways to change the consumption habits of a society. “It is an unfair, regressive tax, that the increase in taxation would arrive at the worst moment for citizens and companies. Other countries they have not achieved the desired effects and it has harmed the economy. The effectiveness of a tax is not measured by the collection, but by its effectiveness in reducing obesity ”, stressed José María Bonmatí, general director of the Association of Large Consumption Companies Aecoc.

For his part, Mauricio García de Quevedo, general director of the Spanish Federation of Food and Beverage Industries (FIAB) has asked the Government and political representatives to be sensitive to the crisis situation in the sector. Remember that the food industry estimates that some 850 companies close this year due to the health crisis, while closures in the hospitality industry reach 90,000 businesses. “The fiscal measures will have to come when the economic reactivation is underway,” he said.

For her part, the general secretary of Restoration Brands, Paula Nevado, has emphasized the impact that this measure will have on consumption, especially in the hotel industry. «The negative impact on consumption. We see how other countries lower VAT and announce bonuses to encourage consumption and here we find the opposite.

Impact on the lowest incomes

Another negative part of the tax increase is that it would fall mainly on the lowest incomes in society. Thus, the report indicates that households with the lowest socioeconomic level, about 4.7 million, and that account for 17% of national income, would end up bearing 22% of the tax collection. «Ad valorem taxes, which are set according to the price of the product, such as VAT and unit taxes, are very regressive, since they do not take into account household income: for each unit of product purchased, they pay the same higher incomes than lower ones, ”he says.

The municipalities most affected by this measure would be the smallest, generally with a rural environment and a lower income. Therefore, the tax increase, as pointed out by PWC, would end up further increasing depopulation and the inequality of wealth and employment. In this sense, the president of Asaja, Pedro Barato, has shown his concern about how it can affect communities such as Castilla y León, whose beet production is considerable.

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