A couple of weeks ago, we told you about the proposal to implement a ‘sin tax’ on aerated drinks in India, that was welcomed by health advocates. Now, beverage manufacturing giant Coca-Cola has announced that should this happen, it may have to shut a large number of its Indian factories.
The Sin Tax
In case you didn’t read our earlier piece, here’s little background. A sin tax is an extra, often steep price levied on products that are considered to be harmful, such as tobacco and alcohol, to encourage consumers to purchase less of them.
In a recommendation ahead of changes to the GST, India’s chief economic advisor, Arvind Subramanian suggested that some items, including carbonated drinks should carry a 40% tax. Many health advocates argue this will benefit the Indian population and help curb health problems like obesity.
In response to the proposed sin tax, Coca-Cola released a statement commenting that “it will lead to a sharp decline in consumer purchases. In these circumstances, we will have no option but to consider shutting down certain factories.”
At present, Coca-Cola employs some 250,000 individuals and maintains 57 factories.
The company has dispatched a spokesperson on its behalf to discuss problems that may arise due to the tax. “The Coca-Cola Company believes in India and identifies it as one of its growth markets,” the company said in the press statement. Additionally, Coca-Cola argues that the tax will result in loss of revenue in the public, as well as a loss of employment if they are forced to shut down factories.
It remains to be seen how the government will respond to Coca-Cola’s concerns.