After the introduction of Sales and Services Tax (SST) on September 1, 2018, the idea of implementing a brand new tax caught the attention of Malaysians. The mystery tax that the Malaysian government is going to implement is the famous soda tax or sugary drink tax which has already been imposed in half of the ten ASEAN countries in Southeast Asia for years.

At first, this idea was a suggestion from the Damansara MP Tony Pua to increase government tax revenue. After the press release, the Domestic Trade, Cooperatives and Consumerism Minister, Datuk Saifuddin Nasution Ismail commented “I think it is a good idea and worth it. It is what the government wants to look into,” and suggested that the government provide more innovative methods to raise government tax revenue.

At the Cities 4.0 + Business 4.0 Conference and Exhibition 2018, Tun Dr Mahathir reinforced the suggestion by saying “The diabetes rate in Malaysia is very high because we take too much sugar”. This statement proved the intention of our new government to tackle the health problems caused by sugar-related disease and raised the possibility of Malaysia having a tax-focused on sugary drinks.

Is soda tax the route forward to a healthier Malaysia? Let’s jump into the analysis of soda tax and how it will affect all Malaysians including you.

What is Soda tax?

Soda tax or sugary drink tax is a specific tax imposed only on drinks with high sugar content e.g. carbonated soft drinks, isotonic drinks, and energy beverages. With the tax, a normal soda drink will be much more expensive than its regular price which encourages the consumer to consider healthier selections such as tea and plain water. The burden of the tax will mainly be on the low-medium income families as soda drinks are considered a treat that is affordable for them with their income level. Other than that, soda lovers will also be heavily impacted by the tax as they are one of the largest consumer group of sugary drinks.

Why Soda tax?

Health Concern and Healthcare Cost

High sugar content in drinks is one of the major causes of obesity and diabetes in Malaysia. National Health and Morbidity Survey 2015 indicates that almost one out of five Malaysian adults has diabetes. Health issues amongst Malaysians have become a serious headache for the government. Diabetes which is normally caused by excessive consumption of sugar will cause fatigue and lack of energy to the sufferer. As a result, the sufferer may lose concentration and affect their productivity levels.

Sugar-caused chronic illnesses also need hefty amounts of medical fees which aggravate the burden of a typical Malaysian household. In addition to that, the Malaysian government needs to allocate an amount in the national budget for public hospitals to improve the standard of healthcare facilities designed particularly for diabetes patient.

By implementing the soda tax, Malaysians will tend to choose drinks with less sugar content due to higher prices of sugary drinks. This policy will slowly and virtually improve the eating habits and health status of Malaysians that are at the verge of becoming a victim of the chronic disease. Workers with better health conditions will deliver higher productivity, higher productivity brings higher GDP, higher GDP at last leads to higher economic growth.

Going a step further, one of the positive spillover effects of a healthier Malaysia population is that it eases the burden of the government’s budget on refining healthcare services which aims to solve the threat of diabetes and other sugar-related chronic illness. The living standard of an average Malaysian will also be improved as the purchasing power of Malaysians rises when unnecessary wastage of money on medical bills are avoided.

Argument and Suggestion

Human beings are often portrayed as rational beings that make decisions to maximize their own benefits and utility. In this case, many people oppose the idea of the government imposing this soda tax as this policy is a paternalism action that interferes with one’s will and right. Paternalism is a system in which the government thinks that people are not rational and smart enough to make their own decisions. This contradicts most people’s beliefs that they should be free to make their own decisions, especially on a trivial matter such as drinking soda. Besides that, people may fear that the approval of the soda tax meant that they are approving government intervention in their everyday lives, which may lead to catastrophe in the future. 

Before implementing the soda tax, the government could have provided educational programmes to create awareness and gain support. Other than that, tax exemptions to soda or soft drink companies that are able to reduce the sugar level in their drinks to a healthier level may be provided. The government can also provide subsidies to research initiatives from the soda industry to develop alternative soda with natural sweeteners. 

Government Implementation 

Following the announcement by the Finance Minister Lim Guan Eng, the soda tax (named as sugar tax in Malaysia) has finally taken effect on 1st July 2019, with a postponement of two months after facing outrage from the manufacturing sector. There are several differences and modifications in the soda tax compared to the normal soda tax implemented in other countries.

  1. Sweetened beverages (includes carbonated, flavoured and other non-alcoholic beverages) with over 5 grams of sugar or sugar-based sweetener per 100 millilitres will be levied an excise tax amount of 40 cents per litre. 
  2. Juice or vegetable-based drinks with over 12 grams of sugar per 100 millilitres will also be taxed. 

One important point is that now that the government of Malaysia has only exercised the tax on the manufacturing sector and has no plans to extend it to the consumer-direct-related sector for example eateries and supermarkets. This is wise as although the tax is levied on the manufacturing sector, the tax burden will distribute across both the consumers and the producers. The policy ensures that no massive public resistance will occur as the majority of consumers would not think that the tax burden is on them. As a result, more efforts can be used on improving the tax implementation and the design of the usage of the tax revenues. 

The tax revenue collected via the soda tax will be used to provide free and healthy breakfast for all primary school students as stated by Prime Minister Tun Dr Mahathir. The breakfast programme aims to provide students with a healthy start to their day while fostering teacher-student bonds. This may be an indirect solution to a healthier Malaysia that inculcates healthy eating habits in students. The programme also takes students from different backgrounds into account to ensure equality in both urban and rural communities. The breakfast programme is one of the programmes where the tax revenue is utilised. With the tax revenue’s expenditure whereabouts known to the public, people’s trust is earned and less resistance are faced by the government for implementation of the soda tax. 

Conclusion

Although half of the ASEAN countries have already imposed soda tax in their countries, the soda tax may not have significant outcomes for Rakyat Malaysia as there are multiple sources of unhealthy foods and drinks. Every country has differences in their economic condition and socio-political background which indicates that the same tax implemented in our neighbouring counties may not necessarily have the same effect in Malaysia. Is soda tax suitable and beneficial to our country? The final answer will probably be positive but it depends on how the Malaysian government carries out and supervises the progress of the soda tax.

References

The Star Online. (2019). RM800mil to RM1.67bil to be spent on Free Breakfast Programme for primary schools. Available at: https://www.thestar.com.my/news/nation/2019/10/09/between-rm800mil-and-rm1-67bil-to-be-spent-on-the-free-breakfast-programme-for-primary-schools-says-education-minister-dr-maszlee-malik [Accessed 24 Nov. 2019]

New Strait Times (2019). Sugar Tax revenue to provide for free breakfast for primary school children. Available at: https://www.nst.com.my/news/nation/2019/03/470787/sugar-tax-revenue-provide-free-breakfast-primary-school-children. [Accessed 24 Nov. 2019]

Free Malaysia Today. (2018). Dr. M: Government mulling soda tax to encourage healthy living. Available at: https://www.freemalaysiatoday.com/category/nation/2018/08/27/dr-m-government-mulling-soda-tax-to-encourage-health-living/ [Accessed 29 Sep. 2018].

Malaymail.com. (2018). Malaysia mulls soda tax already imposed by other Asean countries | Malay Mail. Available at: https://www.malaymail.com/s/1668975/malaysia-mulls-soda-tax-already-imposed-by-other-asean-countries [Accessed 29 Sep. 2018].

Malaymail.com. (2018). ‘Soda tax’ merely suggestion to increase revenue, Pua clarifies | Malay Mail. Available at: https://www.malaymail.com/s/1663162/soda-tax-merely-suggestion-to-increase-revenue-pua-clarifies [Accessed 28 Sep. 2018].

Nst.com.my. (2018). Almost 1 in 5 M’sian adults has diabetes: Health Ministry. Available at: https://www.nst.com.my/news/2017/04/228106/almost-1-5-msian-adults-has-diabetes-health-ministry [Accessed 29 Sep. 2018].

Nst.com.my. (2018). ‘Soda tax’ idea gets thumbs up from Domestic Trade Minister. Available at: https://www.nst.com.my/news/nation/2018/08/402595/soda-tax-idea-gets-thumbs-domestic-trade-minister [Accessed 28 Sep. 2018].

SST Malaysia. (2018). SST Malaysia – Sales & Service Tax Guide in Malaysia. Available at: https://sstmalaysia.com/ [Accessed 28 Sep. 2018].

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Soda Tax - Route to Healthier Malaysia

Writer: Piong Chyi Wei

Reviewer: Vyleen

Editors: Bryan


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