Sugar Tax – An Important Verdict of the Supreme Court

Beer manufacturers presented to tax officials that the fermentation process naturally produces sugar that is not subject to the sugar tax. Officials and judges of administrative courts, however, didn’t consider this explanation. However, there was a breakthrough: the Supreme Administrative Court ruled in favor of the manufacturers.

The Implementation of Sugar Tax:

Since January 1, 2021 sugar tax has been in force. As its justification, the government pointed to the need to change eating habits. He decided that if artificially sweetened products become more expensive, interest in them will decrease.

Article 12a of the Public Health Act regulates that a fee is imposed for the marketing of beverages with the addition of:
sugar (mono- or disaccharides),
food containing sugar,
sweetener (e.g. aspartame),
caffeine or taurine.

According to Art. 12b sec. However, the new fee does not include products containing these substances naturally, such as caffeine in coffee. Beer producers lost many cases before the Provincial Administrative Courts before the Supreme Administrative Court finally agreed with them and ruled that sugar naturally present in beverages, e.g. due to fermentation, is not covered by the sugar tax.

The thing is that one of the beer production processes is fermentation, as a result of which simple sugar is naturally formed in beer, i.e. mainly glucose, fructose, sucrose, and maltose. Thus, beer contains only sugars found naturally in beer, e.g. in fruit. The breweries that questioned the assessment of the tax argued that only sugars added as a result of mixing beer with sweeteners should be covered by the sugar tax. The tax on beer should not include sugars produced in the fermentation process.

Tax officials, and later judges of several Administrative Courts, did not share this approach. They considered that the drinks met the definition of a taxed drink and had added sugars or other sweeteners (ingredients added in the course of production). They also emphasized that it is not possible to determine the content of sugar present in the drink and those added during the production process.

This law that is convenient for the tax authorities has just been shaken. The Supreme Administrative Court issued a groundbreaking judgment in which it decided that the sugar tax cannot be charged on the natural sweetness that is formed in beverages, e.g. in connection with fermentation, informs “Rzeczpospolita”.

The beer industry can be relieved, but this does not end the debates. Manufacturers of fruit and vegetable drinks are still waiting for decisions based on the logic.

Tomasz Wagner, tax advisor, and partner at EY praised the Supreme Administrative Court for standing on the side of the taxpayer and making the effort to find a non-standard solution, derived through a systemic interpretation.