Sugar tax sparks product innovation among manufacturers

by DASHVEENJIT KAUR / pic by ISMAIL CHE RUS

THE sugar tax that would be imposed on soft drinks from April 1 next year is expected to spur industrial innovation among manufacturers to find alternatives to the natural sweetener in their products.

International Chamber of Commerce (ICC) Malaysia chairman Chew Phye Keat said manufacturers had anticipated the introduction of the sugar tax and now are striving to find innovative ways to rethink their manufacturing processes.

“Manufacturers have to think of ways to successfully reduce sugar content, without any change in taste that could potentially affect profits,” Chew told reporters during a business ethics and integrity seminar by the Federation of Malaysian Manufacturers (FMM), ICC Malaysia and Asean CSR Network in Kuala Lumpur yesterday.

The legislative change which would come into effect on April 1, 2019, means consumer must pay a levy on sugar-contained drinks, according to the amount of sugar in a certain beverage.

Finance Minister Lim Guan Eng announced last Friday during the tabling of Budget 2019 that a 40 sen tax per litre will be imposed on soft drinks with more than 5g of sugar or sugar-based sweetener per 100ml.

Among the items include carbonated drinks, or flavoured and other non-alcoholic beverages.

As for juice or vegetable-based drinks, a 40 sen tax per litre will be imposed on drinks with over 12g of sugar per 100ml.

The government’s decision to impose the excise duty on sugar-sweetened beverages is aimed at addressing the obesity issue that is plaguing the country.

“I know that there have been quite a number of manufacturers that have been working on a new approach to production, experimenting with their recipes to reduce sugar content. “Some manufacturers do not want to risk altering the taste of their beverages, so they will find an alternative to sugar, that would exclude the products from being taxed,” Chew added.

He said the drinks levy has also persuaded some companies to move further, faster, but across the breadth of the sector.

Many companies had also already substantially started shifting their portfolio towards low-and no-calorie products long before the levy was announced.

FMM chairman Tan Sri Dr Lim Wee Chai said manufacturers would not opt to underwrite the higher tax as the amount is still affordable for the consumers to bear.

“They will not bear the cost by themselves entirely, but they also do not want to lose customers, while having them to pay for the taxes. That

is where reformulating comes into play. “Alternatives will be out there. Perhaps, sugar will be replaced without having to compromise much on taste, like stevia as a sugar alternative,” Wee Chai said.

Sharing his take on the proposed Budget 2019 tabled by the new government, Wee Chai said all of FMM’s wishlist has been fulfilled.

“The government took up our proposals in several areas, which include the provision of service tax relief on taxable services to manufacturers, and introducing a credit system for small companies to obtain inputs from non-registered businesses.

“We are waiting for more details on the credit system mechanism which could help reduce double taxation,” Wee Chai said.

He added that while there had been many issues faced with the previous government, the federation is glad that the new administration had taken corrective steps and preventive methods to avoid issues that compromises its integrity and efficiency when it comes to dealing with businesses.

“The new government, through its maiden budget, has reflected comprehensive and inclusive ways that would reset the economy to a firm and robust footing that will pave the way for future growth.

“We may still have deficits, but we are on our road to great recovery,” Wee Chai said.