Starting in January 2017, the city of Philadelphia became only the second municipality in the US to impose a tax on sweetened beverages (SBs). Unusually for such taxes, the Philadelphia Beverage Tax (PBT) applies to all SBs, whether sweetened with caloric or non-caloric sweeteners.
A report prepared by Oxford Economics in partnership with the American Beverage Association (ABA) analyzed the economic impact of the PBT a year after its introduction. It found out that the city of Philadelphia lost an estimated 1,192 jobs, which corresponds to an $80 million USD loss in annual GDP and a $4.5 million USD loss in local tax revenue. This reduced economic activity resulted in a $4.5 million reduction in local tax revenue.
Furthermore, the tax led to a significant cross-border shopping phenomenon with a 29% sales drop within city limits while sales increased by roughly 24% in surrounding areas.
The report also highlights a shift in consumption from taxed products (including diets and lights) to untaxed substitutes with calories: sales of untaxed drink mixes and instant teas increased 29 and 32% respectively.
The full report is available 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.
Christopher Snowdon on The Spectator highlights the counterfactual evidence against the three main claims used by the UK Treasury to justify the introduction of a of the Soda Tax in 2018, as announced by former chancellor George Osborne earlier this year.
According to the Treasury’s the tax will only affect corporate profits, not consumers; yet the author contends that consumers, not companies, will be the most affected. While he recognizes that companies are not forced to raise the prices of their products, he points out that the national Office for Budget Responsibility (OBR) expects the levy “to be passed entirely on to the price paid by consumers”.
The second claim is that the tax will incentivise large-scale sugar reduction in soft drinks; Snowdon denounces that “the government has picked on the one part of the food and drink industry that has undergone extensive reformulation and told them to somehow do it all over again”. He argues that the soft-drink industry already provides low and no-calorie alternatives of their products, suggesting there is little room left for further reformulation. The amount of sugar consumed through beverages solely depends on consumers’ preferences.
The third claim presents the tax as the best way to raise money for anti-obesity initiatives. According to the OBR the levy will raise £500 million a year, yet it requires a cost of £1 billion for its implementation alone, enforcement costs and the rise of index-linked salaries, benefits, and public sector pensions are on top of that. Phil Wadsworth, chief actuary at JLT Employee Benefits, estimates that the sugar levy will add £3 billion to UK pensions liabilities. Snowdon warns that any revenue generated by the levy will have no other purpose than to cover its costs for many years to come.
Snowdon concludes with an appeal “the sugar levy aims to do something that has already been done (reformulation of soft drinks) with a tax that will lose the government money… a rethink is urgently needed”.
You may find the original article on The Spectator website
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.
In view of the possible introduction of a tax on soft drinks in Colombia, the newspaper El Nuevo Día interviewed the executive director of the ANDI Chamber of the Beverage Industry, Santiago López Jaramillo. The tax proposal is currently being discussed by an experts committee and will be submitted to the congress by the end of the year, although, according to López Jaramillo, the Minister of Health already requested an analysis of the potential impact of the soft drinks tax, and neither the commission of tax experts set up for the task, nor the OECD recommended it.
López Jaramillo pointed out that the people most affected by the introduction of a tax would be the lower income households, which spend a greater share of their resources on soft drinks; such an impact is of great concern especially in those rural areas where bottled drinks constitute the sole reliable source of potable water.
The negative impact goes beyond that on consumers, according to López Jaramillo the 37% of income revenue for 600 thousands Colombian families depends on the sales of soft drinks. The risk is to repeat what Mexico experienced, where 30 thousand shops closed and 10’800 jobs were lost following the introduction of a soft drinks tax. The emblematic case of Denmark is also mentioned, where a similar levy was dismantled 15 months after its introductions, as it failed to meet its health targets, while at the same time it impacted negatively the economy.
Asked about the positive effect of the tax on people’s health López Jaramillo replied that it was paradoxical that the suggested measure is the one that failed when implemented in other countries. The root of Colombian health problems lies in the population lifestyles, as Colombia is the second most sedentary country worldwide according to the WHO, he said.
The full article from El Nuevo Día can be found here