Cantillon: Fizzy drinks tax would raise significant revenue

We can’t have water charges. The residential property tax is being frozen. And the idea of a broadcasting charge has been shelved. Any new imposition on the public appears to be off limits, with one exception – the proposed new tax on fizzy drinks.

It will be interesting to see how this commitment in the programme for government is dealt with in October’s budget. A good bet would be that not a cent will be collected for the next few years.

There is a touch of “back to the future” here. Between 1916 and 1992 the State had a special excise duty on “table waters” which included most fizzy drinks. It was abolished on the creation of the EU single market.

The pre-budget documents outlined a range of issues to be decided if we want to bring it back. What will be taxed, how it will be taxed, how it will be collected and so on. It could raise significant revenue.

We consume over 400 million litres of fizzy sugar every year, and if the tax was at a similar level to the proposed UK one it could raise €100 million a year, by imposing a charge of roughly 10 cent on a regular can.

You could see the Government being attracted by the €100 million yield, for sure, particularly at a time when the much-debated “fiscal space” – the room for budgetary manoeuvre – is constrained. But take note – the UK has given the industry and the consumer two years and will not impose the tax until April 2018, after a period of consultation on how it will work.

Given the complications and the fact that fizzy drinks don't head into an excise "warehouse" like wine and beer – and thus a collection mechanism is needed – it is hard to see it happening any sooner here. Perhaps the Minister for Finance, Michael Noonan, will start a similar phase-in plan in October.

Another key factor in his mind will be the risk of cross-Border movement of product, if we introduce the tax ahead of the UK. After all, we won’t want to see the infamous trade in red diesel replaced by one in red lemonade.