As the French Parliament is currently debating whether to reshape and increase the tax on soft drinks, an opinion piece published on 9 November in the French newspaper Le Figaro warns readers about the effects of an increase of the current soda tax in place in France.
Bill Wirtz, analyst for European Students for Liberty, argues that such a move would be another Nanny State measure that would penalize the poorest French households, as confirmed by the French Health Minister Buzyn in interviews early October before the proposal was introduced by an MP in the National Assembly.
Wirtz underlines that such taxes may have unintended consequences, such as substitution towards cheaper products containing the same amount of sugar. He also refers to the tax introduced in Denmark which was abolished 15 months later by the government that introduced it for lack of concrete public health results.
The opinion piece can be found in Le Figaro here.
On 23 June, as part of a special report on regulating consumers, the EU media outlet Euractiv reported on the current debate in Europe and across national markets on how government can encourage consumers to make healthier choices through reformulation rather than discriminatory taxation.
The article underlines that EU authorities have launched several initiatives to tackle obesity, but that at national level, governments are discussing the possibility to introduce food taxes, including soft drinks taxes. However, the health benefits of such taxes have not been proven.
Euractiv reports that the soft drinks industry has been an early mover in this debate, reducing by 12% the calorie content in its products from 2000 to 2015 and committing to reduce sugar by a further average 10% between 2015 and 2020, in the context of recent EU policy initiatives to curb obesity and non-communicable diseases, in particular through encouraging reformulation.
The article also notes that the move from the soft drinks industry was applauded by BEUC, the EU’s consumer organisation, which indicated that “it is encouraging that EU member states have made food recipes improvement a top priority”.
The full article is available here.
The article published by the New York Times (NYT) covers the publication by the Health Affairs Journal of an article by Professor Popkin on the impact of the Mexico sugar-sweetened beverage tax. This study finds that purchases of taxed beverages are continuing to decline. It estimates that “overall, sugary drink sales fell by 5.5 percent in 2014 compared with the year before, and by 9.7 percent in 2015 — again compared with 2013”. Mr Popkin also suggests that sugary drink consumption might follow the same path as other products traditionally considered as addictive “like cigarettes and alcohol”. He says that “over time people seem to get more weaned away from the sugary beverages”, which in his opinion would “increase the impact of the tax”.
Following the publication of this article, ICBA released a press statement challenging the assumptions made in the NYT’s piece. It laments the fact that the article relies on theoretical models that do not align with actual tax data from the Mexican Secretariat for Finance and Public Credit (SHCP). These official data actually show an increase in sugar-sweetened beverages (SSBs) sales through 2016 rather than a decrease as suggested by the authors. It also underlines that the tax introduced in Mexico has not proven any health benefit to Mexicans as Mexico’s 2016 national health and nutrition survey shows that obesity rate has gone upward. ICBA’s press release ends by proposing other methods than fiscal interventions such as introducing smaller pack sizes or reformulating existing beverages, which have proven to be successful in curbing obesity trends.
You can find the link to the NYT’s article here
The working paper released by the New Zealand Treasury challenges the argument according to which a tax on sugar-sweetened beverages (SSBs) could be the most effective strategy to fight obesity as it neglects the multiple dimensions linked to this burden. The main argument presented by the author shows that introducing a tax on SSBs will not necessarily mean significant reduction in calorie consumption by consumers and for a number of reasons.
The paper firstly argues that the health status of those responding to a price increase is generally unknown and higher responses may come from healthy consumers rather than the target population group. Moreover, surveys typically measure expenditures rather than consumption and its effects can be experienced after a period of time longer than the survey period.
The author also aims at demonstrating the importance of the substitution effect of imposing a selective tax. Indeed, substitution towards lower-priced SSBs could have harmful rather than beneficial effects. Another problem he underlines is that emphasis is often only placed on the own-price elasticity of demand for SSBs although substitution towards other non-taxed goods that are high in calories can also take place, reducing or even eliminating any direct reduction in the consumption of SSBs. To illustrate the importance of the substitution effect, the author uses a mathematical model designed to examine the effect of total calorie consumption of a selective tax, rather than simply the consumption of SSBs. The conclusions show that the substitution effect to other non-taxed commodities with relatively high calorie content is significant and that imposing a sugar tax does not necessarily mean lower calorie consumption for consumers.
Full paper can be found here
London’s business focused newspaper City A.M. reports the results of a study conducted by the think tank Taxpayer’s Alliance on the impact of the UK sugar tax. Announced by former UK chancellor George Osborne earlier this year the levy, which specifically target soft drinks, is set to enter into force in 2018.
TPA calculated that the levy could lead to an estimated loss of 5’624 jobs for the UK market, equivalent to over £90 million in average industry and associated sector wages. This would consequently lead to a loss for the Treasury of over £17 million in job-related taxes, namely employee’s National Insurance contributions and Income Tax, and employer’s National Insurance contributions. TPA Chief Executive Jonathan Isaby warned: “Not only will the sugar tax fail in its public health aims, there is a very real risk that it will destroy jobs and harm economic growth. Given it will also hit the poorest households the hardest, the already flimsy case for a sugar tax is rapidly dissolving”.
The expected impact of the UK sugar tax was calculated on the outcomes of a similar levy introduced in Mexico in January 2014, which caused an estimated loss of 10’815 jobs since its introduction, but only led to a reduction in daily consumption of a mere “10 millilitres per day or 4.6 calories … the equivalent to a bite of an apple 5% of a slice of Tesco wholemeal bread or 2.3% of a can of Heinz Tomato Soup”, as previously reported by The Sun.
You may find the full article by Francesca Washtell on the City A.M website
You may also find The Sun article by Steve Hawkes on The Sun website
The Sun reports that the UK sugar tax, set to enter into force in April 2018, is facing rising opposition which questions both its merits and its design.
Taxpayers Alliance is criticizing the Government for the introduction of a regressive tax that will raise the cost of living for those less well-off families that endure a daily struggle against tax bills. Drawing from the Mexican precedent the citizens’ association calls out the ineffectiveness of such a measure: in 2014 Mexico introduced a tax on fizzy drinks which led to a reduction in daily consumption of some mere 5 calories, as much as five percent of a slice of wholemeal bread.
Taxpayers Alliance chief Jonathan Isaby said: “It is astonishing that the government is pressing ahead with this pernicious tax when the evidence clearly suggests that it will simply not affect consumption in any meaningful way.”
The Alliance accuses UK’s Councellor George Osborne of pursuing Nanny State policies and demands for the initiative to be revoked.
Lawyers consulted on the matter argue that the tax might be blocked by European courts on discriminatory grounds – given the high sugar drinks such as milk-based and coffee-based beverages are exempt from the duty.
You may find the full article by Steve Hawkes on The Sun website.