Sugar Tax: Would The Price Be Passed Onto the Consumer?

nutrition diet healthThe United Kingdom government is considering the implementation of a sugar tax. This is not new, as a number of similar previous taxes have been implemented in various countries (see figure). The premise behind the tax is to increase the cost of sugar containing foods and thus to decrease the purchase of these foods. It is assumed that be decreasing the consumption, there will be a concomitant increase in the health of the population as a whole. Taxing unhealthy foods is controversial, and evidence does suggest they can work, however, there are many factors to consider and often the law of unintended consequences is brought into play. It is therefore not fully understood how the tax will affect health. For while the effects of sugar on health are fairly well established, the connection between the price of sugar containing foods and health is not so clear. There is likely a threshold over which any price rise would have to reach and any price increase under this threshold may have minimal effects on health.

sugar tax

A number of sugar taxes have been implemented around the World. Generally these are aimed at reducing the consumption of sugar in general, but it is clear that the targeting of soft drink is the main priority. Soft drinks containing high amounts of sugar are particularly detrimental to the health because of the lack of fibre and the high water content which increases the speed of the sugar absorption. However, the sugar in fruit juice has been shown to affect health to a similar degree as soft drinks and yet there is not real desire to limit fruit juice. Similarly in the United Kingdom, it has been proposed that milk drinks and yoghurt drink are also exempt because of the calcium that dairy foods provide. Because of this it is unclear whether the implementation of the tax will have the desired effect. Promoting healthy eating in general, and encouraging a balanced diet may have more dividends than limiting a single macronutrient subgroup. I suggest the government starts with hospital food.

One important considerations is the risk that the manufacturers may choose to offset the cost of the tax by increasing the price of certain products while not affecting others. Generally tax increases are passed onto the consumer, but this is not always in a uniform fashion. For example, evidence suggests that in response to increases in tax duties, tobacco companies preferentially increase the price of products aimed at casual, recreational and infrequent smokers, and this allows them to decrease the effects on regular smokers of their premium products. If the food manufacturers followed a similar strategy, they may choose to increase the price of certain items that were aimed more at the luxury market, and thus allow them to pay the additional tax without affecting their most popular brands. Another alternative is that they could simply lower the amount of sugar in the drinks, but replace it with something outside of the scope of the tax. The addition of artificial sweeteners for example may also have an adverse effect on health.

Eat Well, Stay Healthy, Protect Yourself

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DeCicca, P., Kenel, D. S. Liu, F. 2013. Who pays cigarette taxes? The impact of consumer price search. Review of Economics and Statistics. 95(2): 516-529
Griffith, R., Luhrmann, M., O’Connell, M. and Smith, K. 2016. Using taxation to reduce sugar consumption. Institute for Fiscal Studies. IFS Briefing Note BN180

About Robert Barrington

Robert Barrington is a writer, nutritionist, lecturer and philosopher.
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