Is a tax on sweetened beverages a sustainable policy?
It is now more than a year since Minister of Finance and Economic Affairs Chris Sinckler announced a new ten per cent tax on sweetened beverages. The measure was introduced in Sinckler’s last Financial Statement and Budgetary Proposals.
With the minister scheduled to deliver his first Budget since then, he will be expected to give an update on the success or failure of the measure.
Sinckler had said the “special” excise tax would be imposed on “sweetened beverages such as carbonated soft drinks, juice drinks, sports drinks, and fruit juices”, which contained contain “high calorie sweeteners”.
“Beverages containing intrinsic sugars only, such as 100 per cent natural fruits juice, coconut water, plain milk, [and] evaporated milk will not be subject to the excise tax,” he added.
He said the tax was expected to provide “in excess” of $10 million in revenue for Government in the 2015/2016 financial year.
Sinckler also suggested, however, that the effort was more focused on health than revenue, since Barbados was facing “a national crisis with regards to persistent health problems associated with the escalating level of non-communicable diseases”.
His intention was to review the tax within two years to “determine how effective it has been in shifting the behaviours of producers, importers and consumers as whether it should be extended or intensified”.
While Sinckler might give up an update on the tax during his Budget presentation tomorrow, early indication from him was that there was no drop in the purchase of sweet drinks. Asked for an update seven months ago, Sinckler said: “I haven’t seen the most recent figures, but I believe that we should have those available very shortly in terms of the first quarter of implementation results. What we have seen though in the production figures is that there has not been a decline in consumption.”
He expected such behavioural change would take time, and said the bigger issue was getting Barbadians to lower their consumption of harmful sugar. In the long term, Government would spend less on health care.
What are the lessons from other countries which have imposed taxes on sugar-sweetened beverages?
In January, 2014, Mexico introduced a tax on sugary drinks. In January, the Instituto Nacional de Salud Pública in Mexico and the University of North Carolina published a study. It concluded that on average, a six per cent drop in sugary drink purchases was achieved in 2014.
By the end of that year, there was a 12 per cent decrease and among the poorest households, the annual average sale of sugary drinks dropped by nine per cent, while by December 2014, sales had decreased by 17 per cent, Theconversation.com reported.
The sale of bottled water and beverages with no added sugar also increased by four per cent. The same study found that last year annual sales of sugar beverages decreased from 163 litres to 137 litres per capita.
However, soft drink industry information released three months ago suggested that the Mexico sugary drink tax success had lost ground.
The Wall Street Journal reported in May that Coca-Cola Femsa SAB, Mexico’s largest Coke bottler reported a 5.5 per cent increase in soda sales in the first quarter, compared to the same period last year.
Second largest bottler Arca Continental SAB said its sales of sodas increased by 11 per cent in the same period.
Five months ago, The Guardian newspaper in England, in an article examining the United Kingdom’s plan to introduce such a tax, said there were arguments against a sugar tax. This was based partly on the experience of Denmark and Berkeley, California.
“In October 2011, Denmark introduced a tax on foods high in saturated fat. A year later, it abolished the ‘fat tax’ and dropped plans for a sugar tax, saying the former had encouraged consumers to cross into Germany to shop, unintentionally raised the price of everyday food items and failed to change eating habits,” it reported.
“Berkeley, California, is another of the regions [Public Health England] offers as an example of sugar taxes in action.
But only 22 per cent of its soda tax was passed on to consumers and the measure’s impact as a consequence ‘fizzled out’,” the report added as it quoted a Cornell University study on the issue.
However, the World Health Organisation said there was sufficient evidence to state that using taxation to promote healthy behaviours worked.
A WHO report on the issue said: “The evidence suggests that price policies applied to food can influence what consumers buy and could contribute to improving health by shifting consumption in the desired direction and supporting healthier diets.” (SC)