Malaysia sugar tax: Implementation postponed to July, limits raised for milk-based drinks

By Pearly Neo contact

- Last updated on GMT

Malaysia has announced the postponement of its sugar tax implementation date by three months, as well as an increase in the sugar content limit for milk-based beverages. ©Getty Images
Malaysia has announced the postponement of its sugar tax implementation date by three months, as well as an increase in the sugar content limit for milk-based beverages. ©Getty Images

Related tags: Malaysia, sugar tax, Drinks

Malaysia has announced the postponement of its sugar tax implementation date by three months, as well as an increase in the sugar content limit for milk-based beverages.

The sugar tax implementation of RM0.40 (US$0.01) per litre has been delayed to July 1 from its original April 1 enforcement date​.

It encompasses all packaged drinks under tariff heading 22.02 that contain sugar or other sweeteners in levels exceeding 5g per 100ml, as well as fruit and vegetable juices with sugar exceeding 12g per 100ml.

In a statement, Customs Department Director-General Dato’ Seri T. Subromaniam said that this move would give the local food and beverage industry as well as the Customs Department more time to make preparations and ready itself for the sugar tax.

“[This will also] allow the Royal Malaysian Customs Department to carry out roadshows and issue licences to sweetened beverage manufacturers,” ​he added.

Additionally, the threshold for sugar levels in milk-based beverages (those containing lactose and classified under the tariff heading of 22.02) has been increased to 7g per ml from the original 5g per ml.

Amongst products expected to be affected by this change are Nestle’s Milo and Bliss yoghurt drinks, Marigold’s yoghurt drink range, as well as the Dutch Lady yoghurt drink range.

The lower sugar content threshold will not apply to soy-based beverages.

According to Subromaniam, this threshold increase is a representation of governmental concern and part of ‘efforts to continue promoting the consumption of milk-based products with healthy levels of sugar’​.

Hardest hit

When Malaysian Finance Minister Lim Guan Eng first announced the sugar tax​ during his tabling of the country’s Budget 2019 last year, reactions ranged from approval to scepticism to concern.

“[This decision] is an innovative move to address the ongoing obesity crisis. It is long overdue and should have been implemented much earlier by the previous administration,”​ said think tank Galen via a statement.

“[However], Malaysian consumers have a diverse selection of food and beverages to choose from. The beverages being taxed are but a small proportion of food and drink which are of poor nutrition and high in fat, sugar and salt,”​ said Galen Chief Executive Azrul Mohd Khalib.

“The list is long and arguably more problematic than soda drinks as they are consumed by the majority of consumers. These beverages will unfortunately escape taxation.”

“Consumers will switch or increase preference to familiar alternatives such as sirap bandung, milo, teh tarik (tea and condensed milk), kopi susu (coffee with milk) and three-layered tea.”​

The soft drinks category is expected to be one of the most heavily hit beverage categories. Manufacturing giants Coca-Cola and PepsiCo told us via trade body Federation of Malaysian Manufacturers Malaysian Food Manufacturing Group (FMM MAFMAG) that: “[We] view the introduction of sugar tax on drinks and juice with​ concern.​

“Selective taxation is not an effective policy​ response to promote a healthier lifestyle among consumers.”​

Fraser and Neave (F&N) Holdings Bhd had earlier responded to the tax by predicting an increase in prices for 90% of its products​, which it later backtracked on​.

That said, according to new research from CGS-CIMB, beverage prices are still expected to increase by some RM0.12 (US$0.03) to RM0.20 (US$0.05), although the impact is expected to be ‘minimal’​.

“[The] financial impact from the new excise duty is likely to be minimal, as manufacturers can introduce alternate drinks with lower sugar content, lower the sugar content of existing products, and reduce the sizes of existing products to keep prices unchanged,”​ said the authors.

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