Sugar taxes: The global picture
Tackling obesity is a pressing concern for many governments, with fiscal interventions such as sugar taxes often high on their list of potential interventions.
But sugar taxes always prompt heated debate. Proponents see taxes as a way to increase soft drink prices and thus curb consumption, encourage manufacturers to reformulate or create alternatives, and also create a revenue stream for public health.
But opponents say there is a lack of hard evidence that sugar taxes are effective - with it often hard to prove cause and effect - saying they cost jobs in the industry and hit the poorest the hardest.
Sugar taxes are generally applied specifically to sugar-sweetened beverages, although the rules vary from market to market. Juice and dairy drinks, for example, sometimes benefit from an exception thanks to their nutritional value, but this is not always the case. Certain markets - such as Philadelphia - also tax diet drinks that use artificial sweeteners.
Meanwhile, there are calls in some countries to extend taxes to broader sugary goods such as confectionery.
We take a spin around the globe to look at some of the markets where sugar taxes have hit the headlines.
Please note this is not intended as a comprehensive summary: rather, it seeks to put the spotlight on some of the countries where sugar taxes have been introduced or are under debate.
While sugar taxes appeared to be gaining momentum in the US a few years ago (soda taxes are in force in Boulder, Albany, Berkeley, Oakland, San Francisco, the Navajo Nation, Philadelphia, and Seattle), the tide has turned somewhat over the past couple of years, with residents in Santa Fe rejecting a soda tax in 2017, and government officials in Cook County Illinois repealing a soda tax five months later.
And while the Pennsylvania Supreme Court upheld Philadelphia’s beverage tax in July 2018, a bill introduced by state rep. Mark Mustio that would invalidate the 1.5 cents/oz tax on sugar-sweetened beverages is still floating around, and California and Michigan both passed bills to pre-empt any new local beverage or food taxes for a fixed number of years.
To the frustration of many health advocacy groups, voters in the recent midterm elections in Washington State also supported a ballot measure (I-1634) that would institute a pre-emptive ban on new soda taxes (it doesn’t affect the existing law in Seattle), blaming an influx of lobbying cash from Coca-Cola, PepsiCo, Keurig-Dr. Pepper, and Red Bull North America for the result.
However, voters in Oregon – where the lobbying money spent by the vote ‘no’ and vote ‘yes’ campaigns was more evenly matched, rejected a similar proposal (Measure 103).
As to whether soda taxes are delivering, it depends who you ask, with the American Beverage Association arguing that, “taxes don’t make people healthier, just poorer,” but the Center for Science in the Public Interest (CSPI) arguing that, “If soda taxes didn’t make a significant dent in soda consumption, the industry wouldn’t be fighting them so hard,” and claiming that taxes have decreased consumption of sugary drinks and increased consumption of healthier alternatives.
In a 2017 study in PLOS Medicine, Silver et al found that the soda tax was not fully passed onto consumers in Berkeley, California. However, while Berkeley residents were low consumers of sugar sweetened beverages (SSBs) at baseline, sales of taxed SSBs still fell by 9.6% in relation to predicted sales in the absence of the tax, while sales of untaxed beverages rose 3.5% and total beverage sales rose in Berkeley. Average grocery bills did not increase, nor did store revenue fall more in Berkeley, while SSB sales rose 6.9% in comparison cities.
Critics of soda taxes however, have seized upon market research from Catalina (which showed that sales of sugar-sweetened beverages dropped significantly within Philadelphia’s city limits in the five months after the tax came into effect, but rose by almost as much just outside city limits) as proof that local taxes just drive consumers to shop elsewhere, rather than ditching their soda habits.
While health advocacy groups are still pushing for soda taxes, they have also supported other legislative efforts to reduce sugary drink consumption: in California, Baltimore (Maryland), and Louisville (Kentucky) restaurants are required to make water, milk, and 100% juice the default choices with kids’ meals (although families can still order soda).
While F&B companies worry that healthier kids' menu items won't sell, Disney has proved that making healthier options the default can be a win-win, claimed CSPI VP nutrition Dr Margo Wootan at FoodNavigator-USA’s FOOD FOR KIDS summit. At Disney theme parks, kids’ meals now come automatically with a healthier drink instead of soda, and fruit & veg as a side instead of fries, and it hasn't dented sales, she claimed.
“Parents can still opt out and get fries and soda for no extra cost, but the overwhelming majority of parents stick with the healthy default for beverages, and about half stay with the healthier alternative to fries, so just by changing the default, you can positively impact kids’ diets.”
US retail sales of carbonated beverages were flat (+0.5%) in the year to November 3, 2018, while sales of bottled water were up 4.4%. Still flavored water sales rose 6.3%, while sparkling flavored water sales surged 18.4% (Nielsen data).
The UK introduced its Soft Drinks Industry Levy (SDIL) in April 2018. It has two tiers: a lower rate of 18p per liter for beverages containing 5g sugar per 100ml or more; and a higher rate of 24p for those with 8g sugar or more.
Reformulation has been the name of the game. In 2016 the government announced its intention to introduce the tax: giving manufacturers two years to reformulate or rebalance their portfolios ahead of the levy’s introduction. Big name brands such as Sprite, Lucozade Energy, Capri-Sun and Irn-Bru all reformulated flagship products in advance of the tax.
While initial 2016 estimates said the tax would raise £520m ($667m, €587m) in its first year, the government revised its expectations in March, just before the tax came into effect: saying that – thanks to ‘aggressive reformulation’ undertaken by the industry – the tax could be expected to raise £240m ($308m, €271m).
The tax has raised £153.8m ($197m, €174m) over its first seven months: putting it in line with expectations. Interestingly, the vast majority of revenues – over 90% - have come from beverages paying the higher rate of tax.
Ireland also introduced a sugar tax in May 2018. Its Sugar Sweetened Drinks Tax mirrors the UK’s tax: with the same two-tier system.
For sugar-sweetened drinks with a content of 5g sugar or more per 100ml, a tax of 20c (USD 22c, GBP 18p) per liter applies; and for drinks with 8g sugar or more the rate is 30c (USD 34c, GBP 27p per liter).
The tax is expected to raise around €40m ($45m) in its first year.
Spain announced back in 2016 plans to bring in a tax on sugar-sweetened beverages but it has since been taken off the government’s agenda.
It is instead pursuing a voluntary reformulation programme with food and drink manufacturers with the aim of reducing sugar salt and fat in 3,500 products by 10% by 2020.
The autonomous region of Catalonia, on the other hand, has had a sugary drinks tax in place since May 2017. “The main purpose is to encourage a change in the consumption habits, as recommended by the World Health Organisation (WHO),” said the Catalonian government.
A tax of €0.08 per litre is added to drinks with a sugar content between 5 and 8g per 100ml, rising to €0.12 per litre for beverages with more than 8g per 100ml.
Spanish manufacturers oppose the Catalonian measure on the grounds it disrupts the country’s single market, and a group of stakeholders including the food and drink trade group, FIAB, and beverage association ANFABA are preparing to mount a legal challenge.
"It does not seem reasonable that industrial activity can live with the threat of discriminatory legislative or fiscal initiatives that hamper market unity and generate constant difficulties in the development of the activity," said FIAB director general Mauricio García de Quevedo.
Estonia announced plans to bring in a tax on sugar-sweetened beverages in 2016 but it is not set to enter into force until 2019.
The Estonian levy includes dairy drinks such as sweetened drinkable yogurts and kefir as well as plant-based milk alternatives such as soy-based drinks.
According to a report by the Estonian government, the link between sugary drinks and weight gain is stronger than for any other food or beverage. It notes that nearly 90% (89.2%) of Estonian schoolchildren drink sugar-sweetened beverages in general, and 57% drink them at least once a week.
However, Estonian food manufacturers are worried that a tax on sugary drinks will encourage shoppers to cross the border to neighbouring Latvia.
The Estonian government is understood to be considering partnering with Latvia and Lithuania to reduce the impact of cross-border shopping.
For years, France had a low-level, flat-rate tax on sugary drinks set at €7.53 per hectolitre for all sugar-sweetened beverages, regardless of the quantity of sugar in the drinks. In July 2018, however, the government introduced a tiered-tax rate that varies according to the sugar content.
The tax progressively increases to around €20 per hectolitre for products containing more than 11g of added sugar per 100ml.
When health minister Agnès Buzyn defended the tax in the name of public health, the sugar industry reacted angrily. Sugar beet body CEDUS Le Sucre described her comments as “highly damaging” and “not acceptable”.
However, according to the politician who drafted the law, trained medical doctor Olivier Veran, the tax is already benefitting public health.
"The sugar content of most sodas plunged from 30 to 70% and only in a few weeks,” he wrote on his online blog. “[This is] thanks to the soda tax that I added to the social security financing law, which varies according to the sugar content of drinks. [There is] no financial impact for consumers, and many cases of childhood obesity and diabetes avoided.”
Top of the class for reducing sugar in reaction to the levy is Sprite Original, according to Veran. It cut the sugar content from 6.6g per 100 ml to 2g, equivalent to a reduction of more than 70%. It was followed by Schweppes, which reduced sugar by 40%.
Coca-Cola has not changed the formulation of its original brand to avoid the tax. However, according to French media reports, the soda giant has progressively reduced the size of certain bottle formats sold in supermarkets (from 2 litres to 1.75 l and 1.5 to 1.25) and, in some cases, increased the price to claim back its squeezed margins.
Portugal introduced a tax on sugar-sweetened beverages in 2017, with proceeds going towards the national health system.
The levy is implemented in several tiers: and in its 2019 budget, the government outlined plans to increase the levy in the higher tax bracket. Portugal also has a levy on high-salt content foods.
South Africa’s Sugary Beverages Levy came into effect in April 2018, with the move designed to increase prices of soft drinks.
The levy (part of the Health Promotion Levy) is fixed at 2.1 cents per gram of the sugar content that exceeds 4g per 100ml (the first 4g per 100ml are levy free). ‘Sugar’ refers to intrinsic and added sugars and other sweetening matter. However, fruit juice is exempt.
In its first six months the levy is reported to have raised around R800m ($56.2m).
South Africa’s Healthy Living Alliance is calling for the government to up the tax from April 2019: saying that a 20% tax would be more effective than the current 11% rate.
Chile introduced a tax on sugar-sweetened beverages in 2014 targeting any non-alcoholic beverages to which colorants, flavorings or sweeteners have been added. It applied to beverages with an added sugar concentration of 6.25 grams per 100ml or more, with the previous tax increasing from 13% to 18%.
On the other hand, beverages with sugar levels below this threshold benefited from a decrease in tax from 13% to 10%, producing an 8% tax difference.
Has it made a difference? Well, a recent study in PLoS Medicine indicated that this has led to a 22% decrease in the volume of sugary soft drink purchases. However, the greater decreases were seen in the middle and high socioeconomic groups, with only a 12% reduction seen in purchase volume for the low socioeconomic group.
Study co-author, Professor Cristóbal Cuadrado from the University of Chile, commented: “Our results suggest an overall reduction of sugar consumption after the implementation of the tax in Chile. From a public health perspective, even a small reduction in sugar intake at the population level could lead to significant health gains.
Mexico’s sugar tax was also introduced in 2014. A 2017 paper by scientists from the Mexican National Institute of Public Health and the University of North Carolina found that the 1 peso per liter soda tax led to a 5.5% drop in the first year after the tax was introduced was followed by a 9.7% decline in the second year (Health Affairs, Vol. 36, pp. 564–571).
These data were echoed sales data from the Monthly Surveys of the Manufacturing Industry, which found 7.3% reduction in sales of SSB after two years of Mexico’s sugar tax, compared to 2007-2013.
“Decreases in purchases were higher among households of lower socioeconomic status which could lead to higher health care savings for the country as well as for individuals,” wrote the scientists in Health Affairs. “Given this sustained effect of the tax on purchases and based on results showing that responses to prices of cigarettes (price elasticities) monotonically increase with prices , higher impacts could be achieved by increasing the tax at least to 2 pesos/liter (20% increase in price).”
Barbados and Dominica both introduced a 10% excise tax on sugar-sweetened beverages in 2015.
In Brazil, while there are no sugar tax proposals imminent, the country’s Health Ministry recently announced a deal with 68 companies to reduce sugar levels in 1,147 products, according to Xinhua. Sugar levels would be reduced by 144,000 tons by 2022.
Colombia proposed a 20% tax on sugar sweetened beverages, but this was killed on the last day of 2016 after being dropped from a larger tax overhaul package.
A study published in PLoS ONE concluded that the 20% soda tax in Colombia could have yielded 1% of the government’s total annual fiscal revenue.
From the start of 2018, SSBs have been taxed under the Philippines’ Tax Reform for Acceleration and Inclusion (TRAIN) law.
An excise rate of PHP6 per litre has been put on drinks containing caloric or non-caloric sweetener, and PHP12 per litre on drinks containing high-fructose corn syrup.
Apart from powdered juice, other common sugar-sweetened drink products include carbonated soft drinks and sports and energy drinks.
Previously, various parties had protested against the sugar tax, including the Philippine association of sundry shops and small eateries.
Weeks after the implementation, Coca-Cola FEMSA Philippines laid off 600 employees, blaming the move on the "regulatory environment". Later in the year, FEMSA pulled out of the joint venture.
Malaysia Finance Minister Lim Guan Eng announced an excise tax on sugar-sweetened beverages in September as he delivered the nation’s budget.
The duty proposed will be at RM0.40 per litre to be implemented on 1 April 2019 for non-alcoholic beverages containing added sugars of more than 5gm per 100ml drink; and for fruit or vegetable juice containing added sugars of more than 12gm per 100ml drink.
Industry has reacted with dismay, with major Malaysian retailer F&N claiming products could rise by as much as 90% for its beverages following the announcement.
Australia's two main political parties are set to go into the next federal elections without policies likely to lead to a sugar tax.
The latest statements from the coalition government — encompassing the Liberal Party of Australia, National Party of Australia, Liberal National Party and Country Liberal Party — as well as the main opposition Australia Labor Party have made reassurances that there would not be a tax on sugar-sweetened beverages (SSBs) after the next election.
The next Australian federal election must be held by May 18 2019 for the state senators, and by 2 November for the House of Representatives and the territorial senators.
However, health professionals in the country are continuing to lobby for action, while industry is stepping up its voluntary commitments to lower sugar levels.
In 2018 it committed to 20% sugar reduction across its portfolio by 2025.
The Australian Beverages Council pledge has the backing of firms such as Coca-Cola South Pacific, Coca-Cola Amatil, PepsiCo, Asahi Beverages and Frucor Suntory, with more expected to come on board.
New Zealand’s beverage sector has said it would consider similar voluntary moves to those seen in Australia, amid concerns that calls for a sugar tax are growing.
It came on the back of a New Zealand Beverage Guidance Panel policy brief designed “to highlight the urgency for placing a tax on sugary drinks in New Zealand”.
It said: “A tax on sugary drinks (SDs) is reasonable and necessary and will contribute to reducing the burden of obesity, type-2 diabetes, tooth decay and a number of other diseases.
“A tax on SDs will create an environment where healthier drink options are more attractive (in terms of cost) and more freely available to consumers.”
More recently, New Zealand Health Minister Dr David Clark appointed a well-known sugar tax advocate, Dr Rob Beaglehole, as an advisor, and emphasised that food and beverage firms needed to do more to slash sugar levels.
The Singapore government made no mention of a sugar tax in its 2018 budget, despite food and beverage industry concerns that it could have been set to follow several other nations in introducing the levy.
However, Minister for Finance Heng Swee Keat announced a “progressive” increase in GST from the current 7% to 9% between 2021 and 2025, which will see the cost of food, beverages and supplements rise.
There had been rumours that Singapore could have been set to follow nations such as the Philippines, Sri Lanka and Brunei and introduce a tax on sugar-sweetened beverages and other products.
Sri Lankan beverage firms have been hit in the pocket in 2018 by the country’s tax on sugar-sweetened beverages, which was implemented in November 2017.
Local reports suggest that firms including Nestlé Lanka and Ceylon Cold Stores have been affected.
The increase in costs, which has also translated to consumers, has affected the profitability of the companies.
Ceylon Cold Stores PLC (CCS), a unit of John Keells Holdings (JKH), cited the sugar tax as one of the causes of a plunge in sales.
But in December the country’s Finance Ministry ordered an immediate 40% reduction in the levy on sugar: taking the tax down from 50c per gram to 30c. While the move has been welcomed by businesses; the government has also been accused of backtracking in its fight against diabetes.