Sugar tax threat could prompt a new illicit trade

A tax on fizzy drinks could lead to the start of an illicit trade on soft drinks, an industry expert has warned.

The caution came as part of a wide-reaching look at the implications of a sugar tax on drinks by supply chain experts at Crimson & Co. Co-founder Crispin Mair said that introducing a tax is sure to be followed by illegal trade in non-duty paid goods.

“Whenever a new tax regime is imposed, illicit trade is quick to follow. If the tax is not applied to the entire supply chain, it could open up gaps to be exploited,” he said.

“For example, if it only comes into effect at the point of sale, then opportunities arise at the point of purchase to mislead in what they have paid.”

Mair added that retailers will also be affected by their need to protect their margins. “Retrospective discounting will need tighter control to ensure that the tax achieves its desired aims,” he added.

Retailers said they were concerned that illegal trade could move into the sugar market. “It depends on the amount of tax that they levy in it, but with open borders it could happen,” said Ben Patel of Ben’s Supermarket in Ramsgate, Kent. “You know it’s happening with cigarettes and alcohol and we already have cola brands being imported and sold a lot cheaper.

“It opens up a grey market and it puts an extra burden on resources for the authorities to find people doing it. Education is much more important.”