MALAYSIA July 2019
 
Malaysian government introduces new Sugar Tax Law with effect from 1 July
 
A new excise tax for sugary drinks has finally been implemented in Malaysia in July 2019, after the idea was first mooted by Finance Minister Lim Guan Eng in November 2018.
The new law is part of the government's measure to address the growing obesity problem in Malaysia, as well as bringing down the rate of diabetes which is the highest in Asia.
An excise duty of RM$0.40 (US$0.10) per litre will be imposed on sweetened beverages containing more than 5g of sugar or sugar-based sweetener per 100ml.The sugar tax will also be imposed on carbonated, flavoured and other non-alcoholic beverages.
Meanwhile, juices as well as vegetable-based drinks that contain more than 12g of sugar per 100ml will also be hit by the RM$0.40 (US$0.10) excise duty. The Customs Department has given the manufacturing sector a 2-month transition period from 1 July to 31 August to implement the sugar tax. The Department has also released a guideline and excise duty procedure to assist businesses during the transition period.
Earlier on, the excise tax was scheduled to kick in on 1 April 2019, but was postponed after gathering feedback from manufacturers and the Customs Department.
The government has announced that the revenue collected from the excise duty will be used to provide free and healthy breakfast programmes for Malaysian school students.

How will this sugar tax affect consumers ?
A recent consumer poll was conducted and over half of Malaysians surveyed mentioned that they will consume less soft drinks once the sugar tax is implemented.
Conducted by YouGov, an international survey agency, it found that 59% of the 1,022 consumers will cut back on soft drinks while 13% will stop drinking sugary beverages altogether. Meanwhile, 25% of the respondents said that they will continue to drink the same quantity while 3% will drink more.
The survey also studied the drinking habits of Malaysians and it found that 6% presently consume soft drink several times in a day while 8% consume it once a day. Another 20% consume soft drink several times per week. Only a small 3% did not consume soft drinks.

How will this sugar tax affect manufacturers ?
Soft drink manufacturers like F&N Malaysia is already looking to reformulate 70% of its products to mitigate the effect of the country's sugar tax. F&N has also done intensive R&D to ensure the same great flavor in its soft drink without compromising the taste.
However, there might be a possibility of increasing the soft drink prices slightly in order to cover the rising costs. The sugar tax will affect 90% of F&N soft drink products.
Soft drink manufacturers are also more aggressively innovating into 'reduced sugar' and healthier formulations, and they are also looking at alternative ingredients like the use of plant-based stevia and artificial sweeteners like aspartame etc.
As in the case of F&N, it is already planning ahead by investing in a RM30 million (US$7.3 million) plant in Shah Alam to allow multiple new products to be produced from October 2019 onwards.
 
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