Soft drinks makers including Coca Cola are reportedly considering suing the Government over George Osborne's plans to implement a tax on sugary drinks, which could never see the light of day.
Industry bosses are drawing up plans for a legal challenge to the tax, according to reports in the Guardian and the Sunday Times.
Osborne had said the rules would come into force in 2018 after a two-year delay intended to give companies time to adjust to the rules.
The Government is reportedly in talks with drinks makers to try and prevent a legal challenge that is expected to be made through the European Courts. Industry bosses could claim the tax is discriminatory because it will not hit other beverages with a high sugar content, like milkshakes, fruit juice and even coffee.
If they were successful, they could force the tax to be scrapped.
Leendert Den Hollander, vice-president and general manager of Coca-Cola, said in an interview at Retail Week that a sugar tax would not reduce childhood obesity.
“We just believe there’s no proof or evidence that sugar tax works. There’s no evidence that calories significantly reduce after sugar tax,” Mr Hollander said.
Shares in drinks makers including Tizer and St Clement's producer AG Barr, Britvic and Vimto fell sharply after the announcement on Wednesday.
Plans for a legal challenge heap further pressure on George Osborne following the Budget, which cost the Conservatives one member of the Cabinet when Iain Duncan-Smith resigned over cuts to disability payments.
Analysis by the Office for Budget Responsibility has shown that the tax will cost £1 billion to implement, almost double the £520 million amount it is expected to raise, which Osborne has said will be set aside to fund sport in schools.
Gavin Partington, director general of the British Soft Drinks Association, told the Guardian: “This just reaffirms our view that this tax is ill-considered. The evidence does not suggest it will be effective and taxpayers will be left paying a heavy price for it.”
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