Coca-Cola blocks investment in France over new tax

September 8, 2011 - 9:00 AM

PARIS (AP) — Coca-Cola said Thursday it has suspended plans for a euro17 million ($24 million) investment in France to protest a tax on sugary sodas that's part of government efforts aimed at shrinking the country's huge debts.

The investment in the factory in Pennes-Mirabeau in southern France is on hold pending parliament's debate on the tax, said Tristan Faradet, head of Coca-Cola Enterprise, which produces and markets the company's drinks in France.

Faradet added that Coca-Cola is ready to participate in budget austerity efforts, but considers the tax unfair because it targets drinks that are "not harmful to health."

The government says the tax will raise euro120 million. It's part of a bill aimed at reducing the deficit of the public health care system, itself a component of a series of spending cuts and tax increases being discussed in parliament this month.

France, like many rich countries, has seen a rise in obesity in recent years, especially among children.

"It is necessary to put the brakes on the development of obesity, which weakens the health of the people concerned and represents, over the long term, a large cost for the health care system," the government's proposal reads.

It proposes "to raise the price of sugary drinks, whose unchecked consumption favors weight gain."

Coca-Cola is lobbying legislators and Health Ministry officials to drop the tax.

Leading French amusement park owners successfully persuaded legislators to drop a proposed government tax hike on their parks as part of the new budget cutbacks.

Coca-Cola insisted that suspending the factory investment would not affect any of its 3,000 jobs in France. The company says it has invested euro260 million in France in the past five years.

On its website, Coca-Cola's France operations says obesity is linked to several factors including limited physical activity.

"It is not linked to the consumption of a particular product, but depends on the global nutritional balance," it says.

(This version CORRECTS Corrects that tax is part of health care spending cuts; Updates with more comments, background.)