When you introduce a tax on something, you send a signal to people that the product is unhealthy.
You also create a disincentive to buying it, by raising the price.
Tax the sugar not the drink. But you also therefore encourage the companies that make sugary drinks to reformulate – that is, make drinks with less or no sugar, so they can have their products avoid the tax.
As a bonus, a tax raises money which can be spent on preventative health programs.
The AMA – Australia’s doctors – are calling for a tax only on a subset of sugary drinks: all non-alcoholic drinks containing free sugars, excluding 100 per cent fruit juice, milk-based and cordial drinks. The focus is on drinks that provide no nutritional benefit.
The tax that has been modelled is a specific excise (and customs) tax based on sugar content, set at $0.40 per 100 grams of sugar (per unit of product).
We didn’t just make this up, this rate was chosen with the World Health Organisation’s recommendation in mind – that a tax would need to raise the retail price of sugary drinks by at least 20 per cent, in order to have a meaningful health effect.
The tax rate of $0.40/100g sugar would raise the retail price of the average supermarket sugary drink by 20 per cent.
Under the proposed tax rate, the amount of tax paid on a 375ml can of Coca-Cola with 40g sugar (sugar content is 10.6g/100ml) would be $0.16.
We’ve crunched the numbers and we think this tax would reduce sugar consumption from sugary drinks by 12 to 18 per cent. For reference, that’s 27,596 to 43,804 tonnes of sugar.
Is 43,804 tonnes a lot? It’s hard to visualise that amount, so how about this – a 737 aircraft weighs around 41,000kg. Now imagine over a thousand of those planes. That’s how much less sugar Australians could be consuming as a result. It’s a lot.
Reduced sugar consumption and improved diet would likely lead to a reduction in obesity and chronic diseases, and result in substantial healthcare savings.
Previous Australian modelling estimated that a tax that increases the retail price by 20 per cent would lead to a reduction in the prevalence of obesity of around 2 per cent and healthcare expenditure savings of $609 million to $1.73 billion.
It also estimated that the tax could, over a 25-year period, result in 16,000 fewer cases of type 2 diabetes, 4,400 fewer cases of heart disease and 1,100 fewer cases of stroke.
This is not a new or risky concept to the rest of the world.
More than 58 countries plus nine jurisdictions in the United States have already implemented taxes on sugary drinks.
And there has been confirmed success already in a number of countries, including the United Kingdom (2018), Mexico (2014), France (2012), Chile (2014), Catalonia, Spain (2016), South Africa (2018) and in some jurisdictions in the United States, including Portland (1991), Cleveland (2003) and Berkeley (2015), where robust evaluations have shown a drop in consumption following the tax.
The AMA’s detailed report includes case studies of the United Kingdom and Mexico taxes on sugary drinks, with the United Kingdom tax very similar in design to the proposed Australian tax.
We would be sending a message that sugary drinks are bad for you, and encouraging alternatives.
For the majority of the population, there is an affordable alternative to sugary drinks in the form of tap water. Where there are barriers to safe water, that needs urgent action. All Australians should have the right to clean and safe water.
In reality, there will likely be minimal impact on sugar cane farmers.
That’s because only 20 per cent percent of their total production is consumed in Australia. Over the past ten years an average of 80 per cent of the domestic sugar production has been exported.
Of the domestic production, only 5.3 per cent goes towards the manufacturing of domestic sugar drinks.
We estimate that the change resulting from a drop in consumption due to the tax is only a fraction of that – 0.64 per cent of industry production.
If we are to tackle junk food and its negative impact, we will need more than just a tax on sugary drinks. We need to: