Under pressure from manufacturers, the government has cancelled some of the proposed tax increase on soft drinks adopted in the 2019 Finance Bill.
Rabat – On November 11, the finance committee of the House of Representatives adopted some of the amendments from the 2019 Finance Bill, which included a tax increase of 50 percent on soft and non-carbonated drinks with high sugar levels.
A VAT of MAD 70 per 100 liters was applied to sales of the sweet drinks with 5 or more grams of sugar per 100 milliliters.
After consulting councillors and a hot debate within the committee members on Sunday, the government abolished the MAD 70 VAT on soft drinks. The decision was made after the soft drink manufacturers opposed the VAT, arguing that the tax is “not retrieved” so it is not considered a VAT.
On the other hand, the 50 percent domestic consumption tax increase on soft drinks will be implemented gradually and based on sugar content.
According to the councillors’ new amendments, no domestic consumption tax will be applicable for soft drinks containing less than 5 grams of sugar per 100 milliliters.
However, a 25 percent increase on domestic consumption tax will be implemented on soft and non-carbonated drinks containing 5-10 grams of sugar per 100 milliliters, and a 50 percent increase for soft drinks with more than 10 grams of sugar per 100 milliliters, according to Medias 24.
Read also: Morocco to Raise Taxes on Soft Drinks by 50%
Morocco’s 2019 Finance Bill allocated MAD 17.67 billion for the subsidy fund to subsidize butane gas, sugar, and flour. The figure is a significant increase of MAD 4.65 billion from the 2018 budget.
Soft drink manufacturers are the biggest beneficiaries from the state subsidy on sugar. Morocco provides an MAD 3.7 billion subsidy on sugar annually for consumers, 40 percent of which goes to manufacturers.
Manufacturers currently return only MAD 1 per kilogram of consumed sugar out of a total subsidy of MAD 2.8 per kilograms.
Beginning January 2019, the concerned manufacturers will start returning the remaining MAD 1.8 per kilogram gradually. By 2021, manufacturers will be returning to the total subsidy of 2.8 per kilogram.
The government expects to generate over MAD 313 million from domestic consumption taxes on soft drinks in 2019.
The increased tax may make consumers reduce their consumption of soft drinks and juices and make manufacturers revise the sugar quantity they put in the drinks.