Should we introduce a sugar tax?

In July, the British Medical Association (‘BMA’) has called for a tax of 20% to be added to the cost of sugar-sweetened beverages. The calls comes as part of a package of reforms, such as subsidizing fruit & vegetables and increasing the level of resources directed at education on nutrition, proposed by the BMA to tackle the nation’s poor diet (find a link to the report here). The BMA understands that dietary problems are driven by a combination of factors such as the developmental environment before birth and in infancy; interactions with others; education and health promotion; consumer marketing; stakeholder marketing; access and availability; deprivation and social changes. Accordingly, the body recommends a range of reforms:

A range of comprehensive measures are needed to promote healthier diets among children and young people, from those governing the supply of food and drink products, to policies seeking to modify the demand for specific types of product. A key focus is to tackle the environmental influences that have created a social norm of unhealthy dietary behaviour in the UK. These include the wide availability, promotion and affordability of unhealthy food and drink products. Tackling these influences will help address the modifiable dietary risk factors that underlie the burden of diet-related ill-health.

A 20% tax on sugary drinks as such is just one of the many reforms proposed by the body. The body suggests that there is “evidence of effectiveness of taxation approaches [sic] for sugar-sweetened beverages”. Indeed, the introduction of sugar taxes in Mexico has resulted in a 12% decrease in sales of sugary drinks. This is unsurprising, given that it is largely accepted in the literature that an increase in the price of soft drinks results in a decrease in consumption.[1]

So, that’s it settled then. A sugar tax is all upside.

Well, not quite. One needs to scrutinize these numbers in order to evaluate their impact fully. For if the 12% decrease is purely down to otherwise healthy persons making a rational decision to reduce their consumption of an unhealthy product on the basis of an increase in price, then the tax has failed to achieve its aim. Taking this one step further, if these healthy persons are the wealthier in society, then the dietary behaviour of the poorer members of society will not have changed, meaning the incidence of the tax would fall squarely on them, hence making it highly regressive. Indeed, the BMA accepts the fact that dietary problems in society are largely borne by “individuals from lower socioeconomic groups” and so it is assumed that this group over consumes sugary drinks. Accordingly, any measure designed to reduce consumption of unhealthy foods must focus on changing the behaviour of individuals from lower socioeconomic groups.

The results from Mexico are promising, with a 9% reduction witnessed across these groups. However, it must be stressed that these results are preliminary and subject still to peer-review. Although (h/t Max Schofield) Mexico’s lower house of Congress on Monday approved a proposal to cut the sugar taxes, the amendment was almost immediately overturned by the senate.

The introduction of a sugar tax should ensure in the very least that it actually changes the behaviour of those whose diets are in need of changing. Otherwise, we could have a negative redistribution of money, which in turn could be further exacerbated if the effect of subsidizing fruit and veg would be to benefit the wealthier in society (who already account disproportionately for the purchasing of fruit and veg). The ultimate lesson to be derived from all this is surely that a sugar tax should not be taken as a solitary measure in the fight against obesity, nor was that the recommendation of the BMA when originally proposed. The combination of financial incentives, education, labelling information, and tackling exploitative marketing should be deployed to tackle this problem.

[1] Andreyeva T, Long MW & Brownell K (2010) The impact of food prices on consumption: a systematic review of research on price elasticity of demand for food. American Journal of Public Health 100(2): 216-22.


About taxatlincolnox

Tax law academic. With this blog, I seek merely to contribute to the debate. All thoughts are mine, of course.
This entry was posted in Tax Law. Bookmark the permalink.

One Response to Should we introduce a sugar tax?

  1. Pingback: Sugar tax revisited: a cause for celebration? | taxatlincolnox

Leave a Reply

Please log in using one of these methods to post your comment: Logo

You are commenting using your account. Log Out /  Change )

Google+ photo

You are commenting using your Google+ account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s