By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

Manufacturers yesterday hit back at plans to raise between $4-$10m from a "sugary drinks tax", arguing that these products cannot be blamed for The Bahamas' health crisis.

Walter Wells, Caribbean Bottling Company's president and chief executive, told Tribune Business that the proposal - intended to create a funding stream for the restructured National Health Insurance (NHI) scheme - was "too narrowly focused" on a sector that cannot be blamed for obesity and other chronic non-communicable diseases (NCDs).

The bottler of Coca-Cola, Fanta and other soft drinks added that it was wrong to "single out" one particular sector, and warned that the imposition of such a tax will further "hurt" its business just as it struggles to recover from the budget's VAT hike.

Mr Wells, pushing back at the "sugary drinks tax" proposal in the NHI consultation document released yesterday, said: "We are disappointed to see the Government moving down this path, but I guess companies like ourselves are an easy target.

"The reality is there are many factors affecting our business today, one of which is the recent increase in VAT, which every company is trying to digest because people have less disposable income.

"Any further tax on our business will hurt as people already have less money, and that means less revenue for us and less profit margin."

The "sugary drinks tax" proposal has yet to move beyond the concept stage, and would have to be both approved by Cabinet and legislated by Parliament. No rates or collection mechanism have been specified, but the NHI consultation paper indicates it is very much at the front of the Government's thinking.

Listed among five potential NHI funding mechanisms, the paper said: "Jurisdictional research indicates that 'sin' taxes on particularly unhealthy products, such as sugary drinks, alcohol and cigarettes, are effective revenue sources and create an economic and social incentive to reduce consumption.

"Under our proposed plan, a 'sugary drinks tax' structure will be developed for sugary drinks and potentially other unhealthy products. The funding generated by this tax will be earmarked and flow directly into health education and outreach programmes."

Mr Wells said that while it was "premature" to assess the likely impact and viability of such a tax, "it certainly will not have a positive effect on our business".

He added: "I do believe it's too narrowly focused. I certainly understand the Government's desire to generate revenue and facilitate improvements in our health profile as a nation, and anything I can do in that regard I will.

"But it has to be done in consultation, dialogue, and to single out sugary drinks is too narrow a focus. It doesn't have any direct correlation to obesity. It's a cultural issue, it's a dietary issue. Ti single out one industry for focus, I think, is mistaken."

Besides the "sugary drinks tax", the NHI consultation paper lists four other potential revenue sources for a scheme's whose minimum coverage package will cost around $100m. These are direct government contributions from the Budget; the allocation of VAT levied on health insurance premiums; direct contributions to the NHI Authority from so-called "secondary and exempt" employers; and distributions from a "risk equalisation fund" that will compensate private insurers that take on a 'higher risk' patient population.

Dr Duane Sands, minister of health, justified the "sugary drinks tax" proposal as a "socially responsible" effort to mitigate NCDs, arguing that there was sufficient scientific evidence to link them to health problems.

"There's a huge amount of momentum around the world, based on the problems of NCDs as outlined in international fora we participate in," he told Tribune Business. "It's an evidence-based approach to reducing sugar consumption and mitigating NCDs.

"Given our health profile, can we afford not to put a financial barrier to sugary sweet beverage companies? Is it socially responsible for us not to do it when the evidence shows it works? This is clearly not yet policy, but is in the 'White Paper' as it's important to show what we're thinking."

Dr Sands said current estimates suggested between $4-$10m per annum could be generated for NHI by imposing a "sugary drinks tax", with the Government exploring multiple funding mechanisms to ensure the scheme's viability and sustainability.

"We still have to look at where the money is coming from," he told Tribune Business. "It's not a matter of continually shifting from existing revenue streams. We have to anticipate some of the push back in the market.

"If we're talking about a programme likely to cost $100m, which is pretty much where it comes in, as we increase the package and what's included the price tag goes up. At least we acknowledge there's a cost that's not coming from nowhere, and we have to determine what the national appetite is going to be. Are you willing to pay this cost for this service?"

Dr Sands added that using VAT collected on health insurance premiums to fund NHI might reduce industry "push back" on the levy, as the monies would then "be applied to a product that provides benefits to a greater number of people".

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