A little bit of tax to help the sugar go down
This week saw the debate on taxing sugar sweetened beverages (SSBs) return to centre stage. As Australia – and the world – grapple with the reality more than eight million people die every year from an unhealthy diet, is another sin tax the answer to reducing obesity and diabetes?
The federal Standing Committee on Health, Aged Care and Sport’s recent inquiry into diabetes delivered 23 recommendations. Number four recommended the government implement a levy on SSBs, modelled on international best practice, because of the anticipated improvement of health outcomes. The levy should be graduated according to the sugar content.
(An aside: Recommendation 3 covered off on food labelling reforms to identify the amount of added sugar on front-of-pack labelling, separate to it being included on the Nutrition Information Panel.)
Currently, SSB sales are forecast to be $4.4 billion in 2025-26, with a compound annual growth rate of two percent.
The Parliamentary Budget Office costed a 20 per cent SSB tax, with the tax levied on the GST-inclusive price of SSBs at the point of sale. And it assumed that a 20 per cent increase in price would reduce demand by roughly the same amount and reduce the amount of GST collected. The correlation between the tax and consumption level has played out in countries that have a tax already in place.
The World Health Organisation released its global tax manual for SSBs in December 2022 and called on countries to introduce or increase existing SSB taxes to raise prices, lessen demand, and reduce consumption, highlighting that, globally, more than eight million people die from an unhealthy diet every year (2.6 million from alcohol, by the way).
108 countries tax SSBs with an excise tax but only at an average of 6.6 per cent of the drink’s price. Also – half of those countries are also taxing water so, you know, a way to go.
(For interest, 148 countries apply excise on alcohol, wine is exempt in 22 countries, globally, on average, the excise tax share in the price of the most sold brand of beer is 17.2 per cent. For the most sold brand of the most sold spirits type, it is 26.5 per cent.)
WHO Health Promotion director, Dr Rüdiger Krech, said, “Taxing unhealthy products creates healthier populations. It has a positive ripple effect across society – less disease and debilitation and revenue for governments to provide public services.”
The following year, in December 2023, WHO released its Global report on the use of sugar-sweetened beverage taxes. It was based on a new database it had compiled to provide standardised indicators of price and tax level for an internationally comparable brand of SSB, and information on tax policy for all types of non-alcoholic beverages.
It found that among countries with an SSB tax, less than half apply a specific excise tax system and 16.4 per cent of countries that did, automatically adjust their specific excise tax component to inflation by law.
Half of countries surveyed apply ad valorem (proportionate to the value of the product) excise taxes and most of those countries apply them on the wholesale rather than retail price.
Only nine countries earmark the revenue raised for health programs, mostly channelling funds towards universal health coverage.
Earlier this year, the Rethink Sugary Drink alliance – the Australian Medical Association (AMA), Cancer Council Australia, the Australian Dental Association, Food for Health Alliance, and Heart Foundation – urged the government to introduce a 20 per cent health levy on sugary drink manufacturers.
AMA president professor, Steve Robson, said money raised (he estimated $1 billion per year) could be used to fund obesity prevention and other health initiatives.
“This policy really is a no brainer – it would raise vital funds for preventive health and protect Australians’ health by decreasing the risk of diseases linked to excess weight like heart disease, type 2 diabetes, stroke, and some cancers,” Robson said.
Australian Bureau of Statistics’ data shows that full sugar soft drink consumption accounts for less than 15 per cent of free sugar intake; and that plain bottled water consumption continues to rise – a 12 per cent increase over the recent 12-month reporting period.
A 2022 systematic review of 86 studies and a meta-analysis of 62 studies on the outcomes of implemented SSB taxes around the world said there were limitations in its findings due to a low number of studies, the size of the country/state in question, and the size of the tax. WHO’s report has gone some way to overcome this.
But the review said, “The findings for prices and sales come from overwhelmingly high-quality studies, and the findings from the meta-analysis were robust to multiple sensitivity analyses. Studies of beverage sales found no evidence, on average, of substitution to untaxed beverages.
“Results from this review align with evidence on the outcomes of fiscal policies to reduce consumption of other so-called sin products, including tobacco and alcohol. Governments around the world have increasingly used excise taxes on these products to discourage consumption and reduce adverse health consequences, with documented success.”
In 2018, the UK introduced a two-tier sugar tax on SSBs, targeted at manufacturers to incentivise them to reduce the sugar content in their drinks.
The Medical Research Council’s (MRC) Epidemiology Unit at the University of Cambridge was already running a study tracking obesity levels in children in kindergarten and year 6 from 2014 to 2020. Taking account of previous trends in obesity levels they compared changes in levels of obesity 19 months after the sugar tax came into effect.
There was no significant association between the levy and obesity levels in kindy or year 6 boys. But in year 6 girls, the team found the sugar tax was associated with an eight per cent relative reduction in obesity levels in year 6 girls, equivalent to preventing 5234 cases of obesity per year in this group.
It found reductions were greatest – nine per cent – in girls in low socio-economic areas, where children are known to consume the largest number of SSBs.
But…
Opponents to a tax include the Australian Beverages Council Limited and other industry bodies that say the evidence isn’t there to support the argument that adding sugar to the sin tax fraternity reduces obesity or diabetes.
In 2018, Australia’s largest non-alcoholic drinks companies pledged to cut the sugar in their beverages by 20 per cent by 2025. The pledge covered carbonated soft drinks, energy drinks, sports and electrolyte drinks, frozen drinks, bottled and packaged waters, juice and fruit drinks, cordials, iced teas, ready-to-drink coffees, flavoured milk products and flavoured plant milks. In the first 12 months beverage companies reduced sugar by seven per cent.
In 2020, the results of a 22-year longitudinal study were published. Sales of Sugar-Sweetened Beverages in Australia: A Trend Analysis from 1997 to 2018, published in Nutrients, found a 30 per cent decrease in per capita sugar contribution from non-alcoholic water-based beverages over 22 years. Per person that equated to a drop in consumption equivalent to 32 teaspoons, or 127 grams, of sugar.
It found Australians had shifted their beverage preferences to more low and no sugar varieties, with health a major factor in the changing consumption.
In 2022, the signatories agreed to raise the sugar reduction target to 25 per cent by 2025, up five percentage points on the target set in 2018.
The 2020 study found non-sugar drinks have outsold sugar-sweetened drinks since 2015, with 59 per cent of drinks in the fridge now being non-sugar and 41 per cent being sugar sweetened. In contrast to 1997, 64 per cent of drinks were sugar-sweetened, while were 36 per cent made up of non-sugar options.
Parker said, “The reduction in sugar has been achieved without price hikes to the weekly supermarket shop or making buying a drink more expensive when people are out and about. Since 2015 bottled water sales has outstripped sugar-sweetened carbonated soft drink sales and since 2022 no and low sugar drinks have accounted for more than half of all drink sales.
“Australians now drink almost five times more bottled water than they did two decades ago. Australians are making healthier choices for them and their families without another tax on their household budget.
“The drinks industry will continue to support consumers with more choices and less sugar. We urge other sectors to play their part and commit to their own reductions in sugar, saturated fat and sodium. In 2024 we need a whole-of-industry commitment to playing its part along with government in addressing this complex problem.”
“At the same time, overweight, obesity and diabetes rates have continued to rise which makes this call for an SSB tax illogical” Parker said.
So...
What does Australia do? Do we go it alone, relying on public health education campaigns and voluntary industry programs or do we follow the WHO recommendation and implement an exercise?
If humans were logical creatures, the first two options would be enough.
But we're not.
We're riding off the back of decades of convenient, cheap, and tasty drinks (and foods), to expect an en masse behavioural change to reaching for the water rather than the soft drink is fanciful.
And voluntary codes/pledges/pacts can be very effective – but let's not kid ourselves, there will always be outliers and the pace of change will err on the side of an amble rather than a gallop.
Meanwhile, where are longitudinal studies, consistent across countries with a sugar tax, that demonstrate a correlation between the implementation of the tax, and a drop in adverse health outcomes like obesity and diabetes?
Dare there not be one answer?
