Don't tread on my hamburger! Foodies say no to fast food, soda tax
Published:Sunday | May 4, 2014 | 12:00 AM
Avia Collinder, Business Reporter
Women's Business Owners (WBO) last week endorsed the idea of a "small levy" on sweet drinks and fast food to immediate push-back from the sector, which sees the proposal both as an attempt to indict the products sold by their businesses as unhealthy for society and as a threat to thin profit margins.
Two top owners - William Mahfood of Wysinco Group, which operates Wendy's and Dominoes franchises and is a maker of juice drinks and sodas, and Thalia Lyn of Island Grill - say a soda and fast-food tax could only be characterised in one way: evidence of more bad tax policy.
The beverage and fast food sectors are largely made up of private businesses that hold their accounts close to the vest.
Lyn says the markets are valued at "double-digit billions" of dollars, but she also notes that the sector is characterised by high volumes and low margins whose viability would be threatened by a fast- food tax. Lyn's own chain does more than a billion dollars in sales, she first disclosed two years ago.
On Wednesday, Finance Minister Dr Peter Phillips withdrew his financial transaction tax plan and levied new charges on the insurance sector instead. He had found his alternative.
But on Thursday, president of the WBO, Lorna Green, reiterated that the issue of products which
contribute to poor health is something her organisation definitely wants to "put on the table".
"We are asking them to look at how you do a small levy. What we are talking about is a similar kind of dollar amount - a small amount not to be passed to the consumer - placed on all the heavy sugary drinks," said Green, who heads up her own phone directory service, RedBk Jamaica Limited.
Jamaica imposes what are generally termed 'sin taxes' on products such as cigarettes and alcohol.
Penalising unhealthy behaviour is desirable,
although some might think it unfair, Green said.
"It's
a new day. We are thinking healthier now," she told Sunday
Business.
"When the ban came on cigarette
smoking, there was a lot of upheaval and people thought it was not fair
and abusive. But we have to look at where we are as a country. We have
young people who are suffering from lifestyle diseases, and we have to
be looking at that because it's a strain on the health sector and it's a
strain on them growing up as youngsters," the WBO president and
business owner said.
However, Green adds that her
focus is more so on imported fast foods, and manufacturers and importers
of sugary drinks.
Lyn, a pioneer in transforming
Jamaican jerk chicken into a fast-food franchise, says it is unfair to
characterise the quick-service restaurant segment (QSR) as uniformly
providing products that lead to ill-health.
Her Island
Grill chain comprises 18 stores with over 650 employees. It is
difficult to treat new additions to the chain's cost structure as a
pass-through to customers, who tend to protest price hikes, she said. It
would likely meaning cutting costs elsewhere.
"Salary
and related benefits run around 22 per cent of revenue, so if I want to
make a profit - which we're hard-pressed to do at this time with the
sliding dollar - can you believe some landlords charge rental in US
dollars? - and rising utility costs, the first place I look at are my
controllable costs. So obviously I would have to cut staff," said
Lyn.
"You saw the uproar with the bank withdrawal tax.
Consumers are very price sensitive, so I can't pass on any tax to them.
As it is, when chicken goes up I get push-back," she
said.
Wysinco also operates 18 restaurants between its
Dominoes and Wendy's franchises.
Mahfood says the QSR
sector overall employs about 15,000 persons. Others in the market
include KFC, Burger King, Subway, Tastee and Juici
Patties.
The sector is already heavily taxed with
import duties, consumption tax, and Ministry of Agriculture permits,
says Mahfood, whose company is a leader in the beverage
market.
"When you take the average meal at a
restaurant in Jamaica, 40 per cent of the cost of those inputs already
have taxes in many different forms," he said.
Rather
than prospecting from ever more inventive ways to raise tax revenue, the
business owner said the focus ought to be on cutting the cost of
Government.
He proposes that the Government engage in
"a self-assessment, almost like a soul-searching" on how to close its
budget gap with the right cost cuts.
"It is a critical
deficiency in the administration. We have too many people employed to
government," said Mahfood.
But: "They refuse to cut
costs so every single year, they go back to this well, this bottomless
well of taxation and try and raise revenues," he
said.
Mahfood cited diminishing investments in
telecommunications as an example of the result of bad policy, while
charging that Jamaica has taxed the vigour out of the
sector.
GOVERNMENT CUTBACK
He said, too,
that Government has cut back on capital expenditure, leaving roads,
schools and hospitals in disrepair, while it continues to employ the
same number of people, and paying ever higher rentals and utilities
despite owning buildings.
The upshot, he said, is that
Jamaicans are experiencing taxation without adequate
representation.
"If you do an assessment of every
dollar we earn as consumers in Jamaica, we already pay close to 38 to 40
cents in the form of taxation," said Mahfood. "You have to ask yourself
this question: Are we getting proper representation for this taxation?
Ultimately, the answer is no."
Imposing a fast-food
tax, he says, would require a clear definition of fast-food suppliers so
as not to place entrepreneurs who rent space to operate at a
disadvantage to more informal operations, such as pan-chicken
vendors.
Lyn said that on the beverage side, the tax
would have to extend beyond sodas to include boxed juices, treats such
as kisko pops, bun and cheese, hard-dough bread, pastries, cheesy
snacks, fried foods, ice cream and other foodstuff that have no
nutritional value.
The businesswoman said she has
already had discussions with Phillips when he floated the prospect of
the meal tax.
"I took on the minister head- on when he
mentioned a tax on fast food and invited him to the opening of our
UTech store so he could see that Island Grill is not junk food and does
not contribute to obesity. It is unfair and unjustified to label QSR's
as junk food, as most of us are not," she said.
"Soda
is loaded with calories, I agree, and we are trying to offer choices and
work with our beverage supplier, Wisynco, to formulate a low-cal fruit-
flavoured beverage - example, Otaheitie, Cran-Wata - that we can
dispense from the fountain ... we give our customers choices, so they
can determine what size drink they should have and how much they need to
exercise to burn off those calories if they 'size up'," Lyn
said.