Industry Trend Analysis - Sugar Tax Rejection Spells Relief For Carbonated Soft Drinks - SEPT 2017

BMI View: The decision by the Estonian President to reject a tax on sugary drinks has left our forecasts unchanged for carbonated soft drinks at present . However, t here may be another opportunity later in 2017 to re-submit a potential tax, so this remains a risk to sugary drinks manufacturers as obesity levels rise in the country. We are currently forecasting double - digit growth over the next five years for sales of carbonated soft drinks, significantly outperforming the non-alcoholic beverage market.

The Estonian parliament passed the Government's Sugary Drink Tax Act in June 2017 that would apply a levy on beverages that include high levels of sugar in a bid to reduce high levels of obesity in the country. However, the President of Estonia, Kersti Kaljulaid, refused to sign it into law on July 3. President Kaljulaid agreed with the goal of the sugar tax in encouraging lower sugar consumption, however, believed that this tax was not in accordance with the equal treatment principle set out in the Constitution because it gave exemptions to sugary products sold on board ships or planes on international flights.

The bill has been sent back to Parliament, so there's a chance that the exemptions could be removed and passed again by another vote. It is therefore possible that the Act could pass in another form and will be discussed again in the autumn budget round. Any decision won't be based on the country's need to pad its fiscal position, which will remain stable and post a surplus over the long-term. Estonia's government debt load reflects a relatively small government footprint in the economy and its debt ratio will remain the lowest in the Eurozone.

Estonia In An Enviable Fiscal Position
Budget Balance, % of GDP
e/f=BMI estimate/forecast. Source: National Sources/BMI

This article is part of our Emerging Europe coverage. To access this article subscribe now or sign up for free trial