Sugar Tax and Changes in Total Calorie Consumption

Sugar Tax and Changes in Total Calorie Consumption

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

1700 jobs lost in Mexico one year after new soft drinks tax, while NZ report confirms ineffectiveness of sugar taxes in curbing obesity

1700 jobs lost in Mexico one year after new soft drinks tax, while NZ report confirms ineffectiveness of sugar taxes in curbing obesity

In Mexico, business owners warn that the tax on sugar sweetened soft drinks has affected the competitiveness of the industry, leading to the loss of 1700 jobs since the tax was introduced in 2014. The National Beverage and Carbonated Drink Producers’ Association (Anprac) is looking to meet with the Ministry of the Treasury, in an attempt to modify the current tax system.

According to Anprac, the tax “has had a negligible effect on reducing the calorie intake of Mexicans, but has had a series of adverse economic effects such as the direct loss of over 1700 jobs and a halt to investment in infrastructure by industry”.

“Last year, the sector saw a 2.5% fall in its sales volumes, but the impact on individual calorie consumption, which was one of the reasons cited by the Government for applying this tax, was only 6.2 calories (1.6 grams of sugar) per person per day. It’s more a tax-collection measure than a health-related one”.

Moreover, according to Anprac the revenue raised by the tax on soft drinks “has not been applied toward measures to prevent obesity nor to install drinking fountains in schools”.

 

Similar conclusions can be drawn from a new report, published in New Zealand, on the effectiveness of sugar taxes in curbing obesity: Fizzed out: Why a sugar tax won’t curb obesity. The report, issued by the New Zealand Taxpayers’ Union and based on Nielsen sales data, had following key findings:

  • Only 1.6 per cent of New Zealanders’ total energy intake comes from the added sugar content of sugar sweetened non-alcoholic beverages
  • Sugar taxes hurt the poor and do not result in the decreased consumption tax-supporters claim
  • Similar taxes overseas have not worked

According to Jordan Williams, Taxpayers’ Union Executive Director, “this report confirms what many suspected. A tax on soda will raise a lot of revenue for politicians but do little, if anything, in terms of reducing obesity”.

“Singling out a product that is responsible for only 1.6% of Kiwi’s energy intake is symbolism, not effective public policy. We all agree obesity is a problem, but the evidence is that sugar taxes do very little to improve public health”.

 

The CNNE article on the Mexican tax can be found here (in Spanish).

The press release from New Zealand’s Taxpayers’ Union can be found here.

The report Fizzed out: Why a sugar tax won’t curb obesity can be downloaded here.