France OKs Tax on Sugary Beverages, Part of Austerity Measures

December 29, 2011

On Wednesday, the Constitutional Council of France approved a new tax on sugary drinks as part of efforts to bring the nation's deficit under control. The tax will be levied at roughly 1 euro cent per can of soda (excluding diet products), and will go into effect in just two days.

Coca-Cola, which has five plants in France that employ roughly 3,000 people, has responded by suspending a €17 million investment in the country as "a symbolic protest against a tax that punishes our company and stigmatizes our products." People in the industry have many speculations about what effect this tax will have on the price of soda, with estimates ranging between 10 and 35 percent.

The Constitutional Council, which is the highest court in France, was actually urged by the Socialist-controlled Senate to review this measure and a related rate hike of the French VAT, claiming that the measures "violated the constitutional principle of equality."

While not adopted on a national scale on this side of the Atlantic, we have seen an growing trend of state and local governments proposing and occasionally enacting similar taxes. While proponents of sugar and snack taxes often push these proposals with an aim to curb obesity or promote public health, the pattern tends to be that the taxes are usually only considered by governments that are in dire financial straits.

France seems to fit this description, as they are scrambling to find an additional €100 billion to balance their budget by 2016 and maintain their triple-A credit rating.

For a comprehensive look at sugar and snack taxes, click here.

Recent sugar and snack tax attempts in Massachusetts here.

Follow Scott Drenkard on Twitter @ScottDrenkard.

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