Discriminatory taxes don’t work


Jurisdictions around the world have introduced discriminatory taxes on soft drinks in an effort to tackle the global obesity epidemic, and chronic diseases associated with obesity. However, research to date has failed to prove that such taxes reduce obesity rates or address health concerns in a meaningful way1. In 2017, a report was commissioned by the New Zealand Ministry of Health to review the evidence around the efficiency of sugar taxes. It concluded that evidence that sugar taxes improve health is weak. Authors underline that “there is insufficient evidence to judge whether consumers are substituting other sources of sugar or calories in the face of taxes on sugar in drinks” and that the “evidence that sugar taxes improve health is weak2.


Research shows that while taxes aimed at reducing purchases of soft drinks may have a short-term impact on sales, purchasing behaviour returns to near pre-tax levels over an extended period of time3.


Research does not prove that purchasing fewer soft drinks leads to weight loss4. Weight loss requires reducing total calorie intake.


Increasing the availability of smaller pack sizes, parental education, introducing healthy meals in schools and workplaces and including more physical exercise in the school curriculum are highly cost effective9.


Markets with food taxes such as Hungary, Denmark or Mexico have not provided evidence of public health benefits or reduction in obesity rates. U.S. researchers7 have studied the impact of SSB taxes on public health in jurisdictions where taxes where unusually high. They failed to identify any positive health effects but did find potential adverse effects. Perhaps the most telling argument against imposing discriminatory taxes in order to raise revenue is that time and again actual revenue can be observed to fall well below pre-tax projections. A study from Oxford Economics shows that “empirical evidence from across the world [illustrates that] in some cases, there has been little observed pass-through to consumers, indicating that taxes will be effective at raising revenue but have no health benefits, since consumption will hold up. But in other cases full pass-through of the tax (…) has been observed. In such cases levels of consumption, of the taxed good, might decline but the flip-side is little fiscal benefit since taxes fall in line with reduced sales”8.


The WHO ranks taxing sugar sweetened beverages as one of the weaker recommendations to reduce sugar consumption5. In February 2018, WHO furthermore underlined that “overall, the evidence indicates that, if we are to reduce the risks of diet-related noncommunicable diseases, [it] would be better altering overall diet rather than focusing on the consumption of individual food items. Thus, the relative healthfulness of any nutrient needs to be judged in the context of the entire diet6.

1 Oxford Economics, International Tax and Investment Center. “The Impact of Selective Food and Non-Alcoholic Beverage Taxes”, June 2016

2 Peter Wilson, Sarah Hogan, “Sugar taxes, a review of the evidence”, NZIER report to Ministry of Health.

3 Euromonitor International, Passport. “Sin Tax In Food And Beverages – Strategies, Outcomes and Learnings.” (December 2016)

4 See Fletcher, J, D Frisvold & N. Tefft (2014) Non-linear effects of soda taxes on consumption and weight outcomes, Health Economics

5 Appendix 3 of the World Health Assembly Global NCD Action Plan 2013-2020

 6 WHO Bulletin on fiscal policy, Fiscal Policy to improve diets and prevent noncommunicable diseases: from recommendations to actions, 5 February 2018, p. 202.

7 See Fletcher, J., D. Frisvold and N. Tefft (2014) Non-linear effects of soda taxes on consumption and weight outcomes, Health Economic

8 Oxford Economics, “The impact of selective food and non-alcoholic beverage taxes” 2013, p. 2

9 The McKinsey Global Institute. “Overcoming obesity: an initial economic analysis”, November 2014