FACTORS AFFECTING TAX COMPLIANCE AMONG SMALL AND MEDIUM ENTERPRISES IN KITALE...paperpublications3
Abstract:This study seeks to establish factors affecting tax compliance by Small and Medium Enterprises, with special emphasis on Income Tax and Value Added Tax and their effects on government revenue. Tax compliance level which is internal factor affecting tax revenue not only undermines tax administration infrastructure but also makes the tax base narrow and inequitable. The objectives of the study include establishing the influence of compliance cost, fines and penalties and attitudes of tax compliance among Small and Medium Enterprises. The study adopts a descriptive research design involving both qualitative and quantitative research methodology. The target population was 200, out of which a sample size of 132 respondents were drawn, using stratified and simple random sampling. Questionnaires were used to collect primary data from the respondents, which were analyzed using SPSS applying both descriptive and inferential analysis. There was a positive relationship between the tax and compliance cost (r=.514), fines and penalties (r=.415) attitudes (r=.546) and tax compliance. The findings showed that compliance cost, fines and penalties and attitude had significant relationship with tax compliance. It is recommended that the tax system should provide a clear and simple guideline on how to fill tax returns but also enhance taxpayer education services to enable the taxpayers understand their rights and obligations as taxpayers, there should be moderate levels of fines and taxes so that SMEs are encouraged to comply since they will keep accurate records for taxation purposes in order to avoid fines and penalties.
Keywords: Direct tax, Indirect tax, Medium enterprise, Productive expenditure, tax evasion, tax impact.
FACTORS AFFECTING TAX COMPLIANCE AMONG SMALL AND MEDIUM ENTERPRISES IN KITALE...paperpublications3
Abstract:This study seeks to establish factors affecting tax compliance by Small and Medium Enterprises, with special emphasis on Income Tax and Value Added Tax and their effects on government revenue. Tax compliance level which is internal factor affecting tax revenue not only undermines tax administration infrastructure but also makes the tax base narrow and inequitable. The objectives of the study include establishing the influence of compliance cost, fines and penalties and attitudes of tax compliance among Small and Medium Enterprises. The study adopts a descriptive research design involving both qualitative and quantitative research methodology. The target population was 200, out of which a sample size of 132 respondents were drawn, using stratified and simple random sampling. Questionnaires were used to collect primary data from the respondents, which were analyzed using SPSS applying both descriptive and inferential analysis. There was a positive relationship between the tax and compliance cost (r=.514), fines and penalties (r=.415) attitudes (r=.546) and tax compliance. The findings showed that compliance cost, fines and penalties and attitude had significant relationship with tax compliance. It is recommended that the tax system should provide a clear and simple guideline on how to fill tax returns but also enhance taxpayer education services to enable the taxpayers understand their rights and obligations as taxpayers, there should be moderate levels of fines and taxes so that SMEs are encouraged to comply since they will keep accurate records for taxation purposes in order to avoid fines and penalties.
Keywords: Direct tax, Indirect tax, Medium enterprise, Productive expenditure, tax evasion, tax impact.
Etude PwC/Banque mondiale "Paying taxes 2014"PwC France
http://pwc.to/1fReiKb
Paying Taxes 2014 évalue les impôts et cotisations annuels obligatoires des petites et moyennes entreprises, sur la base d’une « société type » décrite page 140 de l’étude. Les impôts et cotisations évalués comprennent l’imposition des bénéfices, les cotisations et les charges sociales supportées par l'employeur, la taxe foncière, l'impôt sur la transmission du patrimoine, l'imposition des dividendes, l'impôt sur les plus-values, la taxe sur les transactions financières et les taxes sur la collecte des déchets, les taxes sur les véhicules et de circulation routière et d’autres droits et taxes accessoires.
Pour plus d'informations sur l'étude Paying Taxes rendez-vous sur : www.pwc.com/payingtaxes.
Tax reduction for economic developmentM S Siddiqui
The policy makers in Bangladesh prefer higher both income tax and customs duty in order to finance the development work defying the advice of economists. The own experience of tax reduction and reform in tax law since 1990s has increases higher revenue collection. Bangladesh should listen to economist and learn from the experience of two economies and ignore own experiences.
The Effect of Tax Payment on the Performance of SMEs: The Case of Selected SM...Evans Tee
Taxation plays important role in the development of every economy as well as the growth of Small and Medium
Enterprises (SMEs). In a middle-income country like Ghana, the role of SMEs is critical in pushing the socioeconomic
development agenda of the country further. Therefore, alignment of the tax system to the specific
SME growth needs can be considered an important agenda for the policy makers. Keeping this issue at focus, the
study aimed to explore the managers/ executive officers’ perception of the tax system in Ghana on the
profitability of their businesses. The study is based on a survey of 102 managers/ Executive officers of the
selected SMEs in the Ga West Municipality in the Greater Accra region of Ghana. The survey was administered
using questionnaire and interview with the selected respondents. Data was analyzed by descriptive analysis
method, correlation and regression analysis and findings were presented in terms of frequencies and percentage
analysis. Findings indicate that majority of the respondents perceive the adverse impact of existing tax policies
on the growth of SMEs and suggest for reforming the tax policies in the Country. The findings would help the
stakeholders in designing measures to align the tax system to SMEs in a more effective manner.
The causes of success of the micro and small enterprises in Brazil presenta...Cristiano Machado
Apresentação do artigo: The Causes of Success of the Micro and Small Enterprises in Brazil: a review of the last few years - Conferência anual (2010) do Conselho Canadense para Pequenas Empresas e Empreendedorismo - Calgary Canada
Presentation of the paper: The Causes of Success of the Micro and Small Enterprises in Brazil: a review of the last few years - CCSBE 2010 - Canadian Council for Small Business and Entrepreneurship Annual Conference 2010 - Calgary Canada
February 2016 - States: How to get past the fiscal crisisFGV Brazil
As states are confronted with rigid spending requirements and falling tax revenues, public services are deteriorating. The federal government allowed states to borrow from BNDES because it was not making mandatory financial transfers to them, so that a number of states are now in danger of outstripping Fiscal Responsibility Law limits.
The Brazilian Economy is one of the oldest publications for expert economic analysis of both the Brazilian and international economies. Through this publication, FGV’s Brazilian Institute of Economics and Finance (FGV/IBRE) compares different periods of the economy, assessing both macroeconomic considerations and scenarios related to finance, administration, marketing, management, insurance, statistics, and price indices.
For more information, and Brazilian economic index results, visit: http://bit.ly/1EA1Loz
Governance and Democracy Division policy measure) affects men’s and women’s well-being. In coun- tries that allow a joint filing in personal income tax systems with a progressive rate structure, for instance, the low income earner is effectively taxed at a higher marginal tax rate. This of- ten affects women more than men because women’s income is usually lower than their husband’s income. This income differ- ence is partly due to discrimination against women in the labour market and partly due to former discrimination in education. Even though joint filing results in a financial gain for the household in total – because the combined income is in a lower tax bracket than compared to individual filing – it is not necessarily the case that women have a say in how this financial gain is used. The higher taxation of women’s income may influence their labour market participation, child bearing behaviour and their economic welfare in case of a divorce. Some tax reforms may be superior to others in terms of gender equality. The design of the tax system in a country may impact both the distribution of income between women and men (dis- tributional effect) as well as the distribution of paid and unpaid work (allocative effect). For quite some time gender equality and taxation have been key topics in the development policy debate on public finance, finan- cing for development and as well in the debate on the responsibility of the government towards its citizens. It is widely recognized that developing countries must raise adequate revenue from taxes in order to ensure sustainable financing of their poverty reduction and growth strategies. Moreover, relying on taxation for financing government expenditures can have a governance dividend by fostering domes- tic accountability between government and citizens. Gender equality and women’s empowerment is a development goal in its own right, as articulated e.g. in the third Millennium Deve- lopment Goal. The importance of gender equality and taxation, taken individually, has been widely acknowledged. However, they have rarely been discussed together and potential and existing links have largely been ignored in development cooperation. In order to promote sustainable economic growth and poverty re- duction, development efforts must ensure that policy interventions in the area of taxation do not negatively affect desired outcomes in the area of gender equality. For instance, efforts in practice to increase female labour force participation may be thwarted by tax policies that are motivated by objectives entirely unrelated to gender issues. As well may the way a government raises revenues have a different impact on women and men. Mainstreaming a gender equality perspective into general tax policy analysis can significantly improve the quality of public policy.
Slides from the Nevin Economic Research Institute's post Budget seminar. Speakers Michelle Murphy (Social Justice Ireland), Cormac Staunton (TASC) and Michael Taft (UNITE)
Determine the Effect of Subjective Norms on Tax Compliance among Small and Me...AI Publications
This study was conducted to determine the effect of subjective norms on tax compliance among small and medium Enterprises (SMEs) in Mbugani and Igogo wards in Nyamagana district The study adopted a cross-sectional survey in the investigation with quantitative approach where primary data were collected from SMEs with 293 taxpayers’ sample size. Self-administered questionnaires were used to gather the data. Descriptive statistical methods, correlation and regression analyses were used to analyze the data. The data was then analyzed with the Statistical Package for Social Scientist software (SPSS version 25),using Regression analysis and analysis of variance (ANOVA).The research findings based on hypothesis revealed that,subjective norms are positively related (coefficient = .510, t = 4.437, p = .000) to tax compliance and significant. The researcher also conducted reliability tests that produced Cronbach’s alpha (α) coefficients around .70 and above. In running regression analysis, measures with the highest variances in each construct were considered whose analysis of variance (ANOVA) model was statistically significant (F=10.563, p=0.000). Overall, the results show if SMEs are subjected to social acceptance (subjective norms) and social interaction and awareness beliefs there is a positive effect to tax compliance. Therefore a direct Tax Education without addressing the social norms might not meet their respective objectives.
MRC/info4africa KZN Community Forum | October 2012info4africa
Kwazi Mbatha, a CEGAA Researcher/Trainer for the BMET project,was joined by a member of TAC’s uMgungundlovu District community mobilisation team to discuss challenges and opportunities for HIV/AIDS and TB budget monitoring at local levels in South Africa. Relating primarily to CEGAA’s Budget Monitoring and Expenditure (BMET) project, conducted in partnership with the Treatment Action Campaign and entitled "Giving power to the community: Community monitoring of HIV/AIDS and TB spending in two districts in South Africa", this project worked towards increasing the delivery, accessibility, affordability and quality of treatment for people living with HIV/AIDS and TB, thus ensuring that ARVs and TB treatments are available as life-saving and prevention mechanisms. The pilot and secondary phase of the project sought to achieve the above by empowering communities and citizens towards a common understanding of health care delivery and budget issues and collaborative corrective action for optimal health care services at local level.
Etude PwC/Banque mondiale "Paying taxes 2014"PwC France
http://pwc.to/1fReiKb
Paying Taxes 2014 évalue les impôts et cotisations annuels obligatoires des petites et moyennes entreprises, sur la base d’une « société type » décrite page 140 de l’étude. Les impôts et cotisations évalués comprennent l’imposition des bénéfices, les cotisations et les charges sociales supportées par l'employeur, la taxe foncière, l'impôt sur la transmission du patrimoine, l'imposition des dividendes, l'impôt sur les plus-values, la taxe sur les transactions financières et les taxes sur la collecte des déchets, les taxes sur les véhicules et de circulation routière et d’autres droits et taxes accessoires.
Pour plus d'informations sur l'étude Paying Taxes rendez-vous sur : www.pwc.com/payingtaxes.
Tax reduction for economic developmentM S Siddiqui
The policy makers in Bangladesh prefer higher both income tax and customs duty in order to finance the development work defying the advice of economists. The own experience of tax reduction and reform in tax law since 1990s has increases higher revenue collection. Bangladesh should listen to economist and learn from the experience of two economies and ignore own experiences.
The Effect of Tax Payment on the Performance of SMEs: The Case of Selected SM...Evans Tee
Taxation plays important role in the development of every economy as well as the growth of Small and Medium
Enterprises (SMEs). In a middle-income country like Ghana, the role of SMEs is critical in pushing the socioeconomic
development agenda of the country further. Therefore, alignment of the tax system to the specific
SME growth needs can be considered an important agenda for the policy makers. Keeping this issue at focus, the
study aimed to explore the managers/ executive officers’ perception of the tax system in Ghana on the
profitability of their businesses. The study is based on a survey of 102 managers/ Executive officers of the
selected SMEs in the Ga West Municipality in the Greater Accra region of Ghana. The survey was administered
using questionnaire and interview with the selected respondents. Data was analyzed by descriptive analysis
method, correlation and regression analysis and findings were presented in terms of frequencies and percentage
analysis. Findings indicate that majority of the respondents perceive the adverse impact of existing tax policies
on the growth of SMEs and suggest for reforming the tax policies in the Country. The findings would help the
stakeholders in designing measures to align the tax system to SMEs in a more effective manner.
The causes of success of the micro and small enterprises in Brazil presenta...Cristiano Machado
Apresentação do artigo: The Causes of Success of the Micro and Small Enterprises in Brazil: a review of the last few years - Conferência anual (2010) do Conselho Canadense para Pequenas Empresas e Empreendedorismo - Calgary Canada
Presentation of the paper: The Causes of Success of the Micro and Small Enterprises in Brazil: a review of the last few years - CCSBE 2010 - Canadian Council for Small Business and Entrepreneurship Annual Conference 2010 - Calgary Canada
February 2016 - States: How to get past the fiscal crisisFGV Brazil
As states are confronted with rigid spending requirements and falling tax revenues, public services are deteriorating. The federal government allowed states to borrow from BNDES because it was not making mandatory financial transfers to them, so that a number of states are now in danger of outstripping Fiscal Responsibility Law limits.
The Brazilian Economy is one of the oldest publications for expert economic analysis of both the Brazilian and international economies. Through this publication, FGV’s Brazilian Institute of Economics and Finance (FGV/IBRE) compares different periods of the economy, assessing both macroeconomic considerations and scenarios related to finance, administration, marketing, management, insurance, statistics, and price indices.
For more information, and Brazilian economic index results, visit: http://bit.ly/1EA1Loz
Governance and Democracy Division policy measure) affects men’s and women’s well-being. In coun- tries that allow a joint filing in personal income tax systems with a progressive rate structure, for instance, the low income earner is effectively taxed at a higher marginal tax rate. This of- ten affects women more than men because women’s income is usually lower than their husband’s income. This income differ- ence is partly due to discrimination against women in the labour market and partly due to former discrimination in education. Even though joint filing results in a financial gain for the household in total – because the combined income is in a lower tax bracket than compared to individual filing – it is not necessarily the case that women have a say in how this financial gain is used. The higher taxation of women’s income may influence their labour market participation, child bearing behaviour and their economic welfare in case of a divorce. Some tax reforms may be superior to others in terms of gender equality. The design of the tax system in a country may impact both the distribution of income between women and men (dis- tributional effect) as well as the distribution of paid and unpaid work (allocative effect). For quite some time gender equality and taxation have been key topics in the development policy debate on public finance, finan- cing for development and as well in the debate on the responsibility of the government towards its citizens. It is widely recognized that developing countries must raise adequate revenue from taxes in order to ensure sustainable financing of their poverty reduction and growth strategies. Moreover, relying on taxation for financing government expenditures can have a governance dividend by fostering domes- tic accountability between government and citizens. Gender equality and women’s empowerment is a development goal in its own right, as articulated e.g. in the third Millennium Deve- lopment Goal. The importance of gender equality and taxation, taken individually, has been widely acknowledged. However, they have rarely been discussed together and potential and existing links have largely been ignored in development cooperation. In order to promote sustainable economic growth and poverty re- duction, development efforts must ensure that policy interventions in the area of taxation do not negatively affect desired outcomes in the area of gender equality. For instance, efforts in practice to increase female labour force participation may be thwarted by tax policies that are motivated by objectives entirely unrelated to gender issues. As well may the way a government raises revenues have a different impact on women and men. Mainstreaming a gender equality perspective into general tax policy analysis can significantly improve the quality of public policy.
Slides from the Nevin Economic Research Institute's post Budget seminar. Speakers Michelle Murphy (Social Justice Ireland), Cormac Staunton (TASC) and Michael Taft (UNITE)
Determine the Effect of Subjective Norms on Tax Compliance among Small and Me...AI Publications
This study was conducted to determine the effect of subjective norms on tax compliance among small and medium Enterprises (SMEs) in Mbugani and Igogo wards in Nyamagana district The study adopted a cross-sectional survey in the investigation with quantitative approach where primary data were collected from SMEs with 293 taxpayers’ sample size. Self-administered questionnaires were used to gather the data. Descriptive statistical methods, correlation and regression analyses were used to analyze the data. The data was then analyzed with the Statistical Package for Social Scientist software (SPSS version 25),using Regression analysis and analysis of variance (ANOVA).The research findings based on hypothesis revealed that,subjective norms are positively related (coefficient = .510, t = 4.437, p = .000) to tax compliance and significant. The researcher also conducted reliability tests that produced Cronbach’s alpha (α) coefficients around .70 and above. In running regression analysis, measures with the highest variances in each construct were considered whose analysis of variance (ANOVA) model was statistically significant (F=10.563, p=0.000). Overall, the results show if SMEs are subjected to social acceptance (subjective norms) and social interaction and awareness beliefs there is a positive effect to tax compliance. Therefore a direct Tax Education without addressing the social norms might not meet their respective objectives.
MRC/info4africa KZN Community Forum | October 2012info4africa
Kwazi Mbatha, a CEGAA Researcher/Trainer for the BMET project,was joined by a member of TAC’s uMgungundlovu District community mobilisation team to discuss challenges and opportunities for HIV/AIDS and TB budget monitoring at local levels in South Africa. Relating primarily to CEGAA’s Budget Monitoring and Expenditure (BMET) project, conducted in partnership with the Treatment Action Campaign and entitled "Giving power to the community: Community monitoring of HIV/AIDS and TB spending in two districts in South Africa", this project worked towards increasing the delivery, accessibility, affordability and quality of treatment for people living with HIV/AIDS and TB, thus ensuring that ARVs and TB treatments are available as life-saving and prevention mechanisms. The pilot and secondary phase of the project sought to achieve the above by empowering communities and citizens towards a common understanding of health care delivery and budget issues and collaborative corrective action for optimal health care services at local level.
This presentation was made by Mohammed Jahed, Parliamentary Budget Office, South Africa, at the 8th meeting of Parliamentary Budget Officials and Independent Fiscal Institutions held in Paris on 11-12 April 2016.
Sugar sweetened beverages (SSBs) were once seen as harmless indulgences, but are now falling from grace as ASEAN struggles with rising diabetes and obesity figures.
Read how sugar taxes in ASEAN markets are impacting CPG companies and what options exist to protect their bottom line.
Soda taxes and the prices of sodas and other drinks evidence from mexicoContribuyentes mx
To combat a growing obesity problem, Mexico imposed a nationwide tax on drinks with added sugar, popularly referred to as a “soda tax,” effective January 2014. I analyze data on taxed and untaxed products collected as part of Mexico’s Consumer Price Index program to estimate how prices responded to the tax. Prices of regular sodas jumped by more than the amount of the tax in the month that the tax took effect.
In these UK national prevention guidelines, experts prioritised population-wide changes like price rises and outlet restrictions which affect everyone, independent of the choices they make. But in England government prefers to target what they see as the troublesome minority, not the responsible majority.
SUMMARY The UK Department of Health asked the National Institute for Health and Clinical Excellence (NICE) to produce public health guidance on the prevention and early identification of alcohol-use disorders among adults and adolescents. The guidance is for government, industry and commerce, the NHS and all those whose actions affect the population’s attitude to – and use of – alcohol. This includes commissioners, managers and practitioners working in local authorities, education and the wider public, private, voluntary and community sectors.
When writing the recommendations, the Programme Development Group considered evidence of effectiveness (including cost-effectiveness), fieldwork data and comments from stakeholders and experts.
Population versus individual approach
A combination of interventions are needed to reduce alcohol-related harm – to the benefit of society as a whole.
Population-level approaches are important because they can help reduce the aggregate level of alcohol consumed and therefore lower the whole population’s risk of alcohol-related harm. They can help:
• those who are not in regular contact with the relevant services;
• those who have been specifically advised to reduce their alcohol intake, by creating an environment that supports lower-risk drinking.
They can also help prevent people from drinking harmful or hazardous amounts in the first place.
Interventions aimed at individuals can help make people aware of the potential risks they are taking (or harm they may be doing) at an early stage. This is important, as they are most likely to change their behaviour if it is tackled early. In addition, an early intervention could prevent extensive damage.
This NICE guidance provides authoritative recommendations, based on a robust analysis of the evidence, which support current government activities. The recommendations could form part of a national framework for action. National-level action to reduce the population’s alcohol consumption requires coordinated government policy. It also needs government, industry and key non-governmental organisations to work together.
Perspective T h e N EW ENGL A N D JOU R NA L o f M ED.docxkarlhennesey
Perspective
T h e N EW ENGL A N D JOU R NA L o f M EDICI N E
april 30, 2009
1n engl j med 10.1056/nejmp0902392
The obesity epidemic has in-spired calls for public health
measures to prevent diet-related
diseases. One controversial idea is
now the subject of public debate:
food taxes.
Forty states already have small
taxes on sugared beverages and
snack foods, but in the past year,
Maine and New York have pro-
posed large taxes on sugared bev-
erages, and similar discussions
have begun in other states. The
size of the taxes, their potential
for generating revenue and reduc-
ing consumption, and vigorous
opposition by the beverage indus-
try have resulted in substantial
controversy. Because excess con-
sumption of unhealthful foods
underlies many leading causes of
death, food taxes at local, state,
and national levels are likely to
remain part of political and pub-
lic health discourse.
Sugar-sweetened beverages
(soda sweetened with sugar, corn
syrup, or other caloric sweeteners
and other carbonated and uncar-
bonated drinks, such as sports
and energy drinks) may be the
single largest driver of the obe-
sity epidemic. A recent meta-
analysis found that the intake of
sugared beverages is associated
with increased body weight, poor
nutrition, and displacement of
more healthful beverages; in-
creasing consumption increases
risk for obesity and diabetes; the
strongest effects are seen in stud-
ies with the best methods (e.g.,
longitudinal and interventional
vs. correlational studies); and in-
terventional studies show that re-
duced intake of soft drinks im-
proves health.1 Studies that do not
support a relationship between
consumption of sugared bever-
ages and health outcomes tend to
be conducted by authors support-
ed by the beverage industry.2
Sugared beverages are market-
ed extensively to children and
adolescents, and in the mid-1990s,
children’s intake of sugared bev-
erages surpassed that of milk. In
the past decade, per capita intake
of calories from sugar-sweetened
beverages has increased by nearly
30% (see bar graph)3; beverages
now account for 10 to 15% of the
calories consumed by children
and adolescents. For each extra
can or glass of sugared beverage
Ounces of Prevention — The Public Policy Case for Taxes
on Sugared Beverages
Kelly D. Brownell, Ph.D., and Thomas R. Frieden, M.D., M.P.H.
Sugar, rum, and tobacco are commodities which
are nowhere necessaries of life, which are become
objects of almost universal consumption, and which
are therefore extremely proper subjects of taxation.
Adam Smith, The Wealth of Nations, 1776
P E R S P E C T I V E
2 n engl j med 10.1056/nejmp0902392
consumed per day, the likelihood
of a child’s becoming obese in-
creases by 60%.4
Taxes on tobacco products have
been highly effective in reducing
consumption, and data indicate
that higher prices also reduce
soda consumption. A review con-
ducted by Yale University’s
Rudd Center ...
Legal & Political factors having significant impact on the U.S. rest.pdfharihelectronicspune
Legal & Political factors having significant impact on the U.S. restaurant industry –
Taxes – Restaurants have a very wide impact by the tax laws and other financial regulations that
include card swipe fees, food donations rules & depreciation (amortization) write offs etc. Tax
credits offered, sales tax and other regulations are to be always known for any changes and its
impact on business. Export & Import laws also have a considerable impact on restaurants.
Human Resource – Proposed wage and immigration laws are the biggest issues for any
restaurants worldwide. Being the leading work opportunity creators, restaurants in the U.S. have
to deal with many workforce related issues such as, health care/insurance, leaves, tip
allowances & union organizing.
Compulsions/Mandates – Nutrition related issues like obesity, diseases, food safety & menu
labeling are among the political factors affecting the restaurants in the U.S. The government has
laid down certain amount of nutrition level required in the food and also the hygiene of the
kitchen area used to cook & also to store food in the restaurants. There are certain mandatory
food products to be listed on the menus of the restaurants.
Helping the environment – Energy initiatives, agricultural policies and packaging restrictions
affect how you do business. Some restaurants view obstacles as opportunities. They’re off-
loading used fryer oil to alternative fuel providers or advertising sustainable use policies that
attract eco-minded customers, such as featuring local produce and products.
McDonald’s in the U.S.
Despite many published reports on fast food industry and child obesity, there is very minimal or
no government intervention in the operations of McDonald’s in the U.S. The political system as
a whole tends to be far more committed to laissez-faire economics and the fast food industry has
an aggressive and concentrated presence in the capital of which McDonald’s plays a very
significant role. The fast food industry is politically savvy enough to avoid or negate any
proposed regulation that can hamper their growth. Thus it has defeated proposed restrictions on
Trans Fat content, proposed soda tax on drinks and policies aiming to control the amount of
sugar, salt and fat in children’s meals.
All countries in which McDonald’s operates, has some form of public health inspection systems
with regards to restaurants and food producers. In U.S. it is the Food and Drug Administration.
Every employee with food handling capabilities must take part in the food hygiene training at the
company’s expense. McDonald’s adds additional controls to those required by the health
agencies. Even their website states “there are at least 70 checks on beef and chicken every day.
Due to this, their dedication to food safety over and above of what is required by the law is used
as a marketing tool, to emphasize their commitment to quality. McDonald’s also adheres to the
number of employment laws in U.S., including those .
This presentation was made by Bert Brys, OECD, at the 3rd Health Systems Joint Network meeting for Central, Eastern and South-eastern European Countries held in Vilnius, Lithuania, on 25-26 April 2019
Obesity is the third greatest social burden driven by human beings, after smoking and war, violence and terrorism. And while sugar consumption is far from the only cause of this, it is increasingly in the spotlight.
3. 3Taxingyour sweettooth
Contents
The rationale behind the sugar tax 2
International comparison 4
Potential implications of introducing a sugar tax in South Africa 6
Potential implications for the consumer 6
Potential implications for industry 7
Potential implications for the fiscus 7
Potential implications for consumer prices 8
Conclusion 10
Reference list 13
5. 2Taxingyour sweettooth
Therationalebehindthesugartax
The prevalence of obesity in South Africa has increased
rapidly. Between 2003 and 2012, obesity rates in South
Africa increased to 10.6% in men and 39.2% in women.
[1] Scientists argue that the rising consumption of
sugar-sweetened beverages (SSBs) is a significant
contributor to this problem. [2] [3]
In light of the concerns of increasing obesity rates in
South Africa and the announcement in the 2016 budget
speech of a proposed tax on SSBs (sugar tax) in South
Africa1
; the impact of SSB consumption on public
health, consumers and the industry has come into the
spotlight. This prompts the question, ‘are sugar taxes an
effective way to change consumer behaviour?’
Ideally, for tax policy purposes, the sugar tax should
lower the consumption of food and beverages with a
high sugar content and incentivise industry to adjust the
sugar content of its products.
From a philosophical perspective, it is interesting to
consider government’s role in society: hence, the first
part of the inquiry is perhaps to ask why government is
concerned about South African’s personal sugar
consumption decisions? Excessive sugar intake is linked
to obesity and diabetes, which places a burden on the
healthcare system. [4] [5] Therefore, on an aggregate
level, our personal choices regarding sugar consumption
can affect public health. In fact, diabetes mellitus is the
fifth highest cause of natural deaths in South Africa. [6]
Against this background, the age old question is
whether government should come up with policies that
guide us in a particular direction through initiatives that
modify our default choices.
A sugar tax may encourage a healthier option by making
the unhealthy option more expensive, and therefore
unattractive. However, when it comes to altering
behaviour, tax policy may not always be the best
instrument. A more subtle ‘nudge’, for example,
educational awareness programmes, could also be
considered.
Sin taxes are founded on the belief that appropriate
behaviour can be induced by price incentives, following
the expectations of homo economicus.2
In fact, as we
discuss below, there are some studies that show that
an excise tax could lead to a decline in consumption. A
tax can fill the void where our short-sighted view
disregards long-term health considerations. Indeed, our
choices are influenced by a variety of psychological
biases, including a tendency to choose the short-term
benefits of enjoying sugar over the long-term health
benefits of better consumption choices.
Another bias emerges, as price is not the only
consideration in the purchase of a product for which
consumers may have an emotional preference. [7]
Social perceptions and ‘herd behaviour’3
similarly affect
consumer behaviour, and could reduce the
effectiveness of the proposed sugar tax. [8]
This could suggest that obesity and diabetes have a
complex set of causes that requires a multi-faceted
analysis that can include: reducing default portion sizes;
education campaigns (for instance, among parents);
redesigning educational and urban spaces to promote
physical activity; and changes in marketing practices. [9]
Lastly, any policy initiative must take account of the
realities facing South Africans today. In the pursuit of
any policy objective, government should consider the
issue of access on a socio-economic and geographical
level.
1 The specific configuration of the tax on SSBs has not been published by National Treasury at the time of publication of this Thought Leadership. As such, a
tax on SSBs could for example affect carbonated soft drinks, sweetened milk products, ice teas, sweetened juices, and concentrates, or a combination of
these products.
2 In economics, homo economicus, or economic man, is the concept portraying humans as consistently rational and narrowly self-interested agents who
usually pursue their subjectively defined ends optimally. [35]
3 People have a tendency to follow mass behaviour rather than independently deciding what is best for them. [36]
7. 4Taxingyour sweettooth
Internationalcomparison
In this section, we provide a summary of experiences of countries that have implemented excise taxes aimed at curbing unhealthy consumption choices. We present the implications
thereof for industry and the consumer. The selected countries represent varying demographics and lifestyles in order to thoroughly examine the potential effects.
In some instances, the sin tax was found to alter patterns of decision making to reduce the consumption of the taxed good. However, consumers also reacted in surprising ways such
as hoarding, in anticipation of the introduction of the tax, and cross-border shopping. There have also been instances of negative effects on the industry and lower-income households.
Denmark repealed its tax on fatty foods for a variety of reasons, including the administrative burden and emergence of cross-border shopping. Researchers in Mexico have yet to
conclude that the sugar tax has led to a reduction in obesity, as Mexico’s sugar tax was introduced only a year ago. Hungary and the United States maintain their sugar taxes have
shown mixed effects - while consumption has decreased, the effect may not have been as large as originally anticipated.
Table 1 - Country comparison
Tax type Purpose of tax Use of tax revenue Intended outcomes Unintended outcomes
Hungary
Tax on pre-packaged foods high
in salt, sugar and fat, and SSBs.
[10]
Combat obesity and promote
healthy eating. [11]
Finance heavily indebted
healthcare system and direct
funds to measures for the
prevention of obesity. [12]
Cola prices increased by 3.4%,
1.2% and 3.1% and
consumption decreased by
2.7%, 7.5% and 6% from 2011
to 2013, respectively. [13]
Government revenues less than
expected, jobs lost and low-
income earners affected
negatively. [13]
Denmark
Excise tax on saturated fat in
food products. [14]
Decrease risk of lifestyle-related
diseases, and help fund welfare
state. [14]
Support public health
expenditures. Finance tax cuts
and welfare state funding. [14]
[13]
Researchers believe the
consumption of fat decreased
while in place. 1.2 billion DKK in
tax revenues in 2012. [14] [13]
Hoarding, higher calorie intake,
administrative burden and
reduced competitiveness. [15]
Mexico
1 Peso/litre of drinks that
contain added sugar. Tax on
calorie-dense foods. [16]
Address very high prevalence of
obesity. 7% of national health
budget spent on obesity-related
diseases. [17]
Part of the taxes are used to
provide potable water to public
schools, particularly in low-
income areas. [18]
Moderate reduction in
consumption. [19]
1 700 jobs lost.
Disproportionate effect on
lower-income households.
Smaller effect on obese
individuals thus missing the
target market. [16]
Berkeley, US
Tax on distributor for the
privilege of distributing - $0.01
per fluid ounce of SSBs. [20]
Reduce consumption of SSBs
to reduce the human and
economic costs of diseases
associated with excessive
sugar consumption. [21]
Tax imposed as general tax.
SSB committee created to
advise City of Berkeley on
actions and investments for
reducing sugar consumption.
[22]
Consumption data not yet
available, as it is implemented
only in a part of California.
Concerns regarding cross-
border shopping. Price pass-
through lower than anticipated
– lesser fall in consumption and
thus lower health
improvements. [23]
9. 6Taxingyour sweettooth
Potentialimplicationsofintroducinga
sugartaxinSouthAfrica
Potential implications for the consumer
Observational and experimental studies show that the consumption of SSBs is a major source of weight gain in adults
and children. [24]
The rationale for a tax on SSBs is that the resulting increase in the cost of SSBs would reduce the net consumption of
sugar, reduce the total intake of calories and hence lower levels of obesity in South Africa. While various studies provide
evidence of a reduction in obesity levels following a tax on SSBs, the reduction in obesity is often not large, with the
limitations of such studies often calling the results into question. [25]
The possibility of a tax induced reduction in obesity should be balanced against the resulting burden on households,
particularly, lower-income South African households. The proposed tax on SSBs could be regressive in nature because it
is likely to burden poorer households more than their rich counterparts. This could be due to differences in the
composition of household expenditure baskets. As shown in Figure 1, poorer households tend to spend a comparatively
larger proportion of their income on consumption goods, including SSBs. [26]
Figure 1 - Percentage of household income spent on mineral water, soft drinks, and fruit & vegetable juices
Source: Survey of Income and Expenditure of Households, StatsSA, 2010
South African consumers are facing challenging times. Increasing inflationary pressures, driven by food, petrol, and
electricity price increases and interest rate hikes put growing pressure on consumers. In South Africa, more consumers
seek credit to cover daily living costs than in any other country, with 86% of South Africans borrowing money, relative to
a global average of 40%. [27] Indeed, the number of South Africans seeking debt relief through debt relief counselling is
growing exponentially. [28]
How poor households manage their budget constraints affects their ability to switch between different products, which
may have implications for their responsiveness to changes in the price of SSBs. Therefore, it may be worth investigating
the extent to which poorer households are able to switch to healthier products.
1.3
1.1
1.15
0.9
0.55
1 2 3 4 5
Percentageofhouseholdincomespenton
variousdrinks
Income group quintiles
R0 – R4 543 R4 544 – R9 886 R9 887 – R21 002 R21 003 – R57 099 R57 100 - ∞
10. 7Taxingyour sweettooth
Potential implications for
industry
The purpose of the tax on SSBs is to bring about
behavioural change. Yet, there may be a risk that with
the intended behavioural changes, there may also be
undesirable implications for the manufacturing sector
and labour market.
Manufacturers, employees and shareholders could lose
following the introduction of a tax on SSBs. Upon the
announcement of a possible sugar tax in the UK in
March 2016, the share prices of AG Barr, Britvic and
Vimto, three large beverage manufacturing firms, fell
sharply. [29]
The intended effect of the tax on SSBs is to reduce
consumption, possibly leading to a reduction of the
demand for labour along the value chain. South Africa is
expected to harvest the least amount of sugar in the
2015/16 season since 1995, and 22% less than in the
previous year. [30] The sugar industry currently employs
79 000 people directly and 350 000 indirectly, all of
whom could be subject to reductions in wages or
dismissals if the sugar tax has a negative effect on
profitability. [30] A reported 1 700 jobs were lost due to
the SSB- and calorie dense food tax implemented in
Mexico in 2014. [31] In fact, the Beverage Association
South Africa, whose members include prominent
industry players, finds the proposed tax to be
discriminatory. This could mean that business is
anticipating a negative impact on industry. [32]
4 Based on 2015 consumption and population data, and a 20% ad valorem tax on SSBs.
5 Excise tax collection on beer alone was almost five times that of the maximum sugar tax revenue estimated for 2015.
Potential implications for the
fiscus
While international data and evidence on the impacts
and effectiveness of sin taxes is very limited, there are
countries that have recently introduced such taxes with
the effect of changing consumer behaviour and overall
health conditions. The sugar tax could also contribute
towards funding for the South African public health
sector.
The recent announcement of the tax on SSBs by the
Finance Minister, Pravin Gordhan, has been met with
interest and calls for further discussion with industry.
According to the Socio-Economic Impact Assessment
System (SEIAS), approved by Cabinet in early 2015, the
National Treasury will consult with industry prior to the
implementation of a sugar tax. During this process,
more information about the composition and potential
effect of the sugar tax will emerge.
A sugar tax could potentially raise revenues. In the most
liberal scenario, where price has no impact on quantity
consumed, we estimate that SARS would collect up to
around R2.17 billion.4
These funds could be used for
initiatives such as subsidising initiatives that educate the
public about healthy lifestyle choices, as well as aid in
the supply of fresh water to rural areas. Comparing the
expected revenue from the SSB tax to other tax
revenue sources, it seems that revenue may not be the
main goal.5
Indeed, excise tax collection on beer alone
was almost 5 times that of the expected SSB tax
revenue for 2015.
As seen in Denmark and California, where similar taxes
have been implemented, hoarding and cross-border
shopping could lead to a reduction in tax revenue
collected through the sugar tax. Should any of South
Africa’s bordering countries not adopt a similar tax, it
will become more attractive to purchase the beverages
in these bordering countries and illegally bring them into
South Africa. If this occurs on a large scale, the tax
would not succeed fully in revenue collection or
changing consumer behaviours for the better.
However, it is also important to look at the potential
overall health benefit of such an intervention for public
finances. Recent mathematical modelling by University
of Witwatersrand researchers suggests that a 20
percent sugar tax has the potential to save
approximately R10 billion over the next 20 years in the
cost of treating type 2 diabetes. [33] This is no small
number if one considers that diabetes is expected to
cost South Africa as much as R2 billion per year by the
year 2030 in costs such as hospitalisations and
medication. [33]
11. 8Taxingyour sweettooth
Potential implications for
consumer prices
Below, we provide a simulation of the impact a sugar
tax can have on the price of a 2 litre carbonated SSB.
If we assume that the proposed sugar tax is a specific
excise tax, then a certain amount will be levied on a
certain quantity of sugar in every beverage. For
example, Table 2 shows that a tax of R0.01 per gram of
sugar results in a price increase of R2.00 for a 2 litre
bottle. This constitutes a 13.34% price increase.
Table 2 - Simulation 1
Case of specific excise tax on SSBs
Pre-tax price (2 litre) R14.99
Pre-tax price (100ml) (derived) R0.75
Hypothetical amount of sugar per 100ml 10g
Total sugar tax of R0.01 per g/100ml R2.00
Post tax price (2 litre) R16.99
Source: StatsSA, BMI, Statista and KPMG calculations
Table 3 illustrates that an ad valorem excise duty of
20 per cent on every 100ml of a popular soft drink
would result in a price increase of R2.99 for every 2 litre
bottle.
Table 3 - Simulation 2
Source: StatsSA, BMI, Statista and KPMG calculations
Both of these examples show the significant effects on
consumers. Lower-income households will be affected
most by this price increase, as their budget and income
are already stretched. It is important to bear in mind our
assumption of a full price pass-through of the tax to
consumers. The second assumption is that despite a
price increase there is no change in consumption. As a
consequence, the results reflected in the following
simulation show the maximum potential revenue from a
sugar on carbonated SSBs.
6
South African population data as well as per capita spending on soft drinks in 2015 are used to estimate total national spending on soft
drinks. We adjust this figure to account for the spending on diet or no-sugar-added options of soft drinks (1.5%). In a hypothetical
scenario, we assume a 20% ad valorem tax on sugar-added soft drinks, and assume that the price increases by the same proportion, but
spending habits are left unchanged. The difference between pre-tax spending (ZAR) on soft drinks and after-tax spending (20% increase
in ZAR) reflects the potential tax revenue in this simulation.
In order to illustrate the somewhat limited potential of
the proposed sugar tax to boost revenue collection, we
make a hypothetical assumption of no reduction in the
consumption of SSBs, following the tax induced price
increase. Despite this unlikely and liberal assumption,
the revenue collected is comparatively small. Based on
our estimations, South Africa would have collected
more than R2 167 million in tax revenue in 2015 from
the ad valorem sugar tax, 0.22% of total revenue for the
financial year 2014/15. This is not a negligible amount.
However, in terms of other revenues collected, this tax
represents just 20% of the revenues collected from the
excise tax on beer. Figure 2 below confirms that the
estimated revenue from the proposed sugar tax is lower
when compared to the revenue collected from sin taxes
on beer and cigarettes. While the revenue from the sin
tax on beer and cigarettes are R 10 665 million and R
12 845 million respectively, the estimated revenue from
the sugar tax is R 2 167 million.
Figure 2 - South African revenue collected from
excise taxes: 2015 calculation
Source: StatsSA, BMI, Statista and KPMG calculations6
2 167
10 665
12 845
SSBs Beer Cigarettes
Rmillion
Case of ad valorem excise tax on SSBs
Pre-tax price (2 litre) R14.99
Pre-tax price (100ml) (derived) R0.75
Hypothetical amount of sugar per 100ml 10g
Total sugar tax of 20% per 100ml of SSB R2.99
Post-tax price (2 litre) R17.98
12. 9Taxingyoursweettooth
Conclusion
“What is “good” regulation? That
is not an easy question to answer,
but regulation that has a clear
focus of what it needs to achieve,
where the benefits outweigh the
costs and where potential
unintended consequences are
anticipated and addressed as
soon as possible, certainly goes a
long way towards being
considered “good”
Lullu Krugel
KPMG Chief Economist and
Director, South Africa
“
13. 10Taxingyour sweettooth
Conclusion
There are wide-spread concerns about public health,
growing levels of obesity and diabetes, high sugar
consumption and the associated costs in South Africa.
The goal for policymakers is to incentivise consumers to
make healthier lifestyle choices that improve their
quality of life and capacity to contribute to society.
However, before a solution can be introduced, a solid
behavioural and economic analysis is necessary to
ensure that consumers react as intended and the
benefits of the regulatory change outweigh the costs.
Research estimates that a 20% tax on SSBs in South
Africa could reduce obesity by between 0.6% and 7.1%
in men and 0.4% and 4.4% in women. [1] However,
taking into account the assumptions in this research,
the recommendations pertaining to the effect of a sugar
tax should be explored further.
Indeed, the proposed tax has raised questions due to
mixed results in other countries. The demand for SSBs
can be sensitive to price changes and substitution to
products that hold a higher health risk. [34] As a result,
even prior to further analysis, the potential reduction in
obesity does not seem definitive.
Moving forward, government will consult with various
stakeholders on the proposed sugar tax including
industry and consumers. Indeed, the promulgation of
‘good regulation’ is central to the South African
government’s agenda. A range of initiatives are in
progress to address South Africa’s policy coordination
and implementation challenges. In early 2015, Cabinet
approved the replacement of the Regulatory Impact
Assessment (RIA) system with the SEIAS to achieve a
broader assessment of policy initiatives. SEIAS will
consider the impacts on different stakeholders and take
the country’s socio-economic context into account while
advancing the government’s developmental policies.
As part of the broader regulatory impact assessment of
the sugar tax, as envisioned by the SEIAS, the
exploration of the effect of sin taxes on consumption
patterns is paramount. Research suggests that
consumers may resist price increases and may continue
to purchase SSBs with little consideration of the tax
induced price increase. Furthermore, those who do
respond may not be the main target of policy – health-
conscious consumers tend to make healthier choices
that pre-empt the intended effect of a tax. Therefore,
investigating how consumers will respond to the tax in
terms of their behavioural changes is strongly
recommended.
Furthermore, as part of the implementation of the
SEIAS, stakeholders should investigate the impact of
the sugar tax in terms of potential unintended
consequences such as job losses or unnecessarily
burdening consumers. How the sugar tax will affect the
government’s goals around poverty alleviation and
reducing income inequality is central to understand. As
part of the broader regulatory impact assessment, an
analysis of the effects of the sugar tax on the entire
economy in terms of economic growth, household
expenditure, investment, tax revenue and employment
levels by industry and skills level can allow policymakers
to balance the demands of various stakeholder in
society.
Lastly, the SEIAS suggests an investigation of
alternative options for achieving the desired policy
outcomes. The question emerges whether more so
than on its own, the sugar tax combined with focused
education and awareness initiatives could ‘nudge’ South
Africans towards healthier diets and lifestyles. [9]
Various recent breakthroughs in behavioural science can
assist policymakers and other stakeholders to nudge
consumers towards healthier lifestyle choice, for their
benefit as well as society’s.
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17.
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and offering an extensive global
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excellence, KPMG is positioned to be
the preferred partner in business for
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19. Lullu Krugel
Chief Economist and Director
T +27 (0)82 708 2330
E lullu.krugel@kpmg.co.za
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Head of Ethics Advisory and Associate Director
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E schalk.engelbrecht@kpmg.co.za
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Economist
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E cezanne.samuel@kpmg.co.za
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