Food industry warns: sugar tax could fuel inflation

“In a high-tax country like Austria there is no place or need for a discriminatory tax like the sugar tax,” says Katharina Koßdorff Managing Director of the Food Industry Association. She sees the tax as a “further weakening of Austria as a location and as a driver of inflation, which, as a trivial tax, is not a real source of income for the state anyway.”

challenges

According to Koßdorff, the introduction of a sugar tax would also have a financial impact on consumers, especially those who are socially disadvantaged. The costs for sugary drinks would increase, which could significantly affect household purchasing power. From January 1st, 2025 there will be a Deposit of 25 cents introduced per can or PET bottle. A sugar tax on top would make the affected drinks even more expensive, which poses challenges for companies such as Almdudler, Pfanner, Coca-Cola, Rauch and Red Bull, which have recently invested in Austria and secured many jobs.

For consumers, the tax could lead to a shift towards cheaper and therefore potentially less beneficial products. Instead of changing consumer behavior, the tax could trigger unintended negative consequences, says Koßdorff.

“There is already hardly an industry that does not have a special tax with an educational character. If the steering effect is dubious, the motive of generating income dominates, so that with every new tax the burden of taxes increases even further,” says Christian HelmensteinChairman of the economic research institute Economica.

A sugar tax would not only increase the prices of sugar and sugary drinks, but would also have a domino effect on other industries. Food prices across the board could rise as producers pass on the additional costs to consumers. This would further fuel inflation, says Helmenstein.

And last but not least, such a tax would… farmers’ production costs increase and could significantly jeopardize the competitiveness of farmers and the processing industry. “The danger that many of the approximately 5,000 farmers will have to stop their sugar beet production is real,” warns Helmenstein.