Cut in free breakfasts because of failed sugar tax?

How much revenue from the sugar tax has been collected and is projected to be gained annually? Just as important, how is this money being spent? Wasn’t it supposed to be earmarked?

Vinodh Pillai, FMT

The government’s move to scale back on its ongoing free breakfast programme in primary schools has seen a litany of criticisms online, some of which, on face value, were politically motivated while others raised questions worth asking.

Perhaps the most obvious is this: Shouldn’t the government have more than enough money to fund the programme for all students, irrespective of financial background? After all, wasn’t that the point of the sugar tax?

The tax is an excise duty of 40 sen per litre on sweetened beverages containing more than 5g of sugar or per 100ml of sugar-based sweeteners. Carbonated, flavoured and other non-alcoholic beverages have also been taxed, as well as juices and vegetable-based drinks with more than 12g of sugar per 100ml.

The list of drinks now sold at slightly higher prices is widely extensive. They include premixed teas and coffee drinks (those three-in-one ones), chocolate-flavoured milk, Coca-Cola, and canned coffees. So, the usual suspects, basically.

It’s a great move as it taxes the equally bad substitutes like fruit juices.

The World Health Organization (WHO) says that a tax on sugary drinks that raises prices by 20% can lead to a reduction in consumption of around 20%, thus preventing obesity and diabetes.

Figures also show that is also a worthwhile investment for governments, with the US Congressional Budget Office estimating that a three-cent-per-ounce tax would generate over US$24 billion over four years. Scale that down to Malaysia’s population size and the revenue collected would still be quite high.

Prime Minister Dr Mahathir Mohamad reportedly said in March that the sugar tax revenue would be used to provide free and healthy breakfast for all primary school children, said to cost between RM800 million and RM1.67 billion to cater to 2.7 million primary school students nationwide.

But since he took over as acting education minister, Mahathir said the programme will now be limited to only those from poor backgrounds.

Granted, there are large questions that remain answered. What about children who are vegetarians? What about those who prefer eating at home? What about those who occasionally prefer eating at home, but may want to eat at school on some days? What about food going to waste? What if students don’t want to eat the free food out of fear of being seen as poor?

But larger than that is why the sudden apparent flip-flop?

How much revenue from the sugar tax has been collected and is projected to be gained annually? Just as important, how is this money being spent? Wasn’t it supposed to be earmarked?

After all, that was how the tax was justified in the first place.

A common argument against the imposition of taxes on sugary drinks is that the tax is regressive because consumers on lower incomes will be more negatively impacted by higher prices than consumers on higher incomes. But the effect could be countered if the collected tax revenue is used to subsidise healthy food. Is that being done now?

It is worth noting that the programme was never expected to generate significant revenue, as stated by the Malaysian Association of Tax Accountants (MATA) in July last year. MATA had also urged the government to explain to the people that the main point of the tax was to reduce sugar consumption, and not to generate significant income – though a preliminary analysis by Unicef and WHO suggested that it could raise significant revenue.

I wonder if studies were carried out that justified the cost and funding of the free breakfast programme. Or is it the case of the tax not earning that much revenue as was expected? If so, how bad is the situation? Surely all these very realistic scenarios had been considered when implementing large-scale projects like these.

In 2016, the UK tax on soft drinks brought in half as much money as ministers first predicted. Six months after the tax was imposed, it was expected to generate £240 million by the end of the year. It had been expected to generate £520 million. Is this the case for Malaysia?

The benefits of imposing taxes on soft drinks are wide-ranging and include reducing consumption of these drinks and reducing the incidence of diabetes, stroke and premature deaths. Just as taxing tobacco helps to reduce tobacco use, taxing sugary drinks can help reduce consumption of sugar. And it certainly has, worldwide.

One wonders though if the money collected is being put to good use. Recent research cited by the WHO suggests that around 25% of Malaysian children from a wide range of socio-economic backgrounds do not eat breakfast on a regular basis.

For the sake of transparency, the government should reveal how much revenue it has generated so far from the sugar tax and why it is not enough to fund the free breakfast programme.

Vinodh Pillai is a programme officer for the Galen Centre for Health and Social Policy.