Features International Sugar Journal

Credibility of taxing sugar

The UK government recently announced the introduction of tax exclusively on sugary soft drinks –fruit juices and sugar-laden milk shakes are exempt. The tax will be introduced in 2018. It will target sugar content in product above both 5g and 8g per 100 millilitres and aims to raise £520 million (US$737 million). The justification for the tax is to check the rise in obesity, especially childhood obesity. Mexico appears to be the flag bearer for the tax where obesity among children rose by 40% over the period 1999-2006, and the main culprit was identified as sugar-sweetened beverages (SSBs). In January 2014 Mexico imposed tax at the rate of one Mexican peso (USc 6) per litre on any beverages with added sugar, including fizzy drinks, energy drinks, bottled tea and coffee, fruit juice and any fruit-flavoured drink. Several other countries have followed suit – some 39 states in USA have taxes on SSBs, as do France Hungary. South Africa will be introducing one next April. But the short history and analysis of the rationale behind taxing sugar raises significant doubt as to whether it leads to improved health for consumers.

Studies in USA have indicated that while the consumption of SSBs has been dropping since 2000, obesity has held steady. Therefore the argument that decreasing SSBs consumption will improve health is that it simply has not. Diabetes levels in the US increased until 2010 and levelled off in 2011. If SSBs are implicated in obesity and related diseases, how can this be? It is apparent that there is no clear correlation between consumption of SSBs and obesity and diabetes et al. Frank Hu, a professor of nutrition and epidemiology at Harvard’s School of Public Health, attested to the complexity of the issue when he says that “it is not clear whether the decline in SSB consumption actually contributes to the plateau of the [diabetes] epidemic, because Type 2 diabetes is a multi-factorial disease.”

Looking at the data on per capita consumption, it is apparent that in countries with the highest consumption of sugar, such as Israel, Brazil, Cuba and Guatemala (see table), there is no call in these countries for sugar tax, suggesting that potential health related problems are not exclusive to sugar consumption. Obesity is indeed a complicated issue where interactions of nutrition, fitness, occupation, genetics and environment dictate body weight.

Per capita consumption of sugar (kg, raw value)

  Oct-Sept 15/16 Oct-Sept 14/15 Oct-Sept 13/14 Oct-Sept 12/13 Oct-Sept 11/12 Oct-Sept 10/11 Oct-Sept 09/10 Oct-Sept 08/09 Oct-Sept 07/08
Israel 74.26 74.05 73.84 73.65 73.46 72.89 71.70 72.41 72.95
Cuba 72.63 70.26 67.89 63.28 54.36 54.12 54.06 63.46 64.46
Brazil 60.51 60.82 62.10 63.31 63.56 63.82 64.17 64.09 63.18
Guatemala 60.16 61.12 62.10 62.93 63.48 60.73 57.87 58.12 56.81
Mexico 39.73 39.40 37.18 39.11 38.19 37.29 41.50 44.52 46.08
UK 33.84 34.09 34.28 34.54 34.74 34.53 34.32 33.55 33.26
USA 33.87 34.09 34.84 33.69 32.51 33.31 32.57 31.37 31.93
Source: FO Licht

Available evidence suggests that elasticity of SSBs is not particularly high or they are not price sensitive. Recent data from Mexico compiled by Nielsen indicated that following the introduction of the tax in 2014, there was a dip in sales, but the overall net decline in sales has been 0.39%. The tax did not impact consumer behaviour, even though it was seen as regressive and aimed at the poor. The main beneficiary has been the government who has collected 18.3 billion (US$1.05 billion) and 21.4 billion pesos (US$1.22 billion) in 2014 and 2015 from the tax, respectively. A study published in 2013 in British Medical Journal suggested that tax of SSBs would probably result in reducing the average Brit’s daily calorie intake by two calories, particularly since drinks account for only 20% or so of sugar consumption.

While there are few exceptions where intervention of governments is necessary to protect its citizens from harm – take the case for car seat belts and tobacco taxes, but when it comes to sugar, it seems to be unfairly demonized with ill-targeted and ill-justified tax.