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Prevention: Tax and pricing

Case for a tax on sugar-sweetened beverages (SSBs) in Australia

Last updated 14-05-2021

The obesity-related price policy that has received the most attention in Australia to date is a tax on sugar-sweetened beverages (SSBs). Such taxes have been shown to reduce consumption of SSBs, which is associated with weight loss. Taxes can also encourage manufacturers to reformulate SSBs to reduce sugar content.

Key Evidence

01

An SSB tax in Mexico reduced consumption, particularly among low socio-economic households

02

Consumption of SSBs in Australia is highest among men aged 18-24 years

03

Multiple health and community groups in Australia have called for an SSB tax

In Australia, the price policy that has received the most attention to date with regard to obesity is a tax on sugar-sweetened beverages (SSBs). SSBs are defined as beverages with added caloric sweeteners such as sucrose, high-fructose corn syrup or fruit juice concentrate. This includes soft drinks, sports drinks, fruit drinks, energy and vitamin water drinks, sweetened mineral waters and cordials. These beverages contribute no valuable nutrients to consumers’ diets but deliver large quantities of sugar – a single can of Coke, for example, contains 40g of sugar (approximately 10 teaspoons).1 SSBs are an easy-to-define category of products that are energy dense and nutrient poor, with close healthier substitutes (such as water).2

A tax on sugar-sweetened beverages

The primary motivation for taxing SSBs is to decrease their consumption, with the aim of improving diets and reducing Australia’s burden of chronic disease as part of a comprehensive approach to addressing obesity. Taxes can also encourage beverage manufacturers to reformulate their products to reduce sugar content; convey the message that the products are a matter of concern for public health; and raise revenue that can be used for health initiatives.3

Free sugar consumption in Australia

Australian Health Survey data shows that more than half of Australians aged two years and older exceeded the World Health Organization’s recommended limits on energy from free sugars in 2011–12.4 Free sugars are sugars added to foods by manufacturers or consumers, and those naturally present in honey, syrups and fruit juices. The WHO recommends limiting energy from free sugars to less than 10% of daily energy intake (around 12 teaspoons). In 2011–12, Australians aged two years and older consumed an average of 60 grams of free sugar per day (14 teaspoons), with 52% of this free sugar coming from sugary drinks.4 Australians are high per-capita consumers of SSBs, and consumption is highest among young men aged 18–24 years.5

Health impacts of sugar-sweetened beverages

Obesity is a risk factor for chronic disease including cardiovascular disease, type 2 diabetes and some cancers. While overweight and obesity are complex conditions with multiple causes, evidence from randomised controlled trials and prospective studies show that regular consumption of SSBs is associated with long-term weight gain.6 Their association with weight gain appears to be linked to a reduced feeling of fullness when sugars are consumed in a liquid form.7 Consumers do not compensate for the additional energy from consumption of SSBs by reducing consumption of other foods and further, SSBs can induce hunger.8 At a young age, SSB consumption can enhance preferences for sweet food and drinks, and displace more nutritious beverages such as milk.

Impact of taxes on sugar-sweetened beverages

Evidence shows that vulnerable populations such as young people, low-income consumers and those most at risk of obesity, are most responsive to changes in the relative prices of food and beverages.9 It should be noted that the introduction of the 10% Goods and Services Tax (GST) in 2000 reduced the tax on soft drinks in Australia from the previous 22% sales tax.10

Systematic reviews of taxes on SSBs have synthesised real-world evidence from jurisdictions that have introduced such taxes, and evidence from simulation studies. These reviews conclude that taxes reduce consumption of SSBs.11 12 13 In turn, reduced consumption of SSBs is significantly associated with weight loss.14 Empirical evidence continues to build about the scale of health benefits that will flow from SSB taxes due to reduced consumption of these beverages. Modelling studies have predicted large reductions in cases of cardiovascular disease, stroke, diabetes and some cancers.1516

Volumetric tax in Mexico

Empirical evidence from Mexico shows that its volumetric tax of 1 peso per litre on SSBs has reduced purchases. The tax was introduced in 2014 and has led to a price rise of about 11% for soft drinks, and a slightly smaller increase for other sweetened beverages.17 An analysis of SSB purchases over the first two years of the tax found that the effect increased over the first year, and stabilised in the second year to achieve an average 9.7% reduction in purchases of SSBs.18 Reductions in SSB purchases were greatest among households at the lowest socioeconomic levels (a 17% decline in the purchase of taxed beverages compared to a 6% decline among households of a higher socioeconomic position). Researchers said the findings provided early evidence that SSB taxes would have an increasing effect over time in driving down consumption, in line with evidence from tax increases on tobacco and alcohol.

Soft Drink Industry Levy in the United Kingdom

In the United Kingdom, reformulation was a major objective of the Soft Drinks Industry Levy (SDIL) introduced in April 2018. The SDIL is a two-tiered levy that taxes producers according to a drink’s sugar concentration, with different rates for drinks containing more than 8 grams of sugar per 100 millilitres and those containing 5 to 8 grams of sugar per 100 millilitres. Drinks containing less than 5 grams of sugar per 100 millilitres are not taxed.19 On the day before the levy was introduced, the UK Treasury said it had already had an effect, resulting in widespread reformulation equivalent to removing 45 million kilograms of sugar from soft drinks each year.20

Confirming this reformulation effect, an analysis of soft drink availability in UK supermarkets between September 2015 and February 2019 found the percentage of drinks with sugar content of more than 5 grams per 100 millilitres fell from an expected 49% to 15% over the time period studied.21 Many manufacturers chose to reformulate to just below the 5 gram threshold. Some of the levy was passed onto consumers through higher prices but not always on targeted drinks, with low-sugar variants also increasing in price.

Benefits of an Australian tax on sugar-sweetened beverages

A recent Australian study based on dietary intake data estimated the consequences of an additional 20% tax on SSBs in Australia on health and health care expenditure.16 The results show that a 20% tax on SSBs would result in an average 12.6% decline in daily consumption of SSBs, and a decline in obesity of 2.7% in men and 1.2% in women over a lifetime. The study concluded that there would be sustained reductions in the incidence of diabetes, cardiovascular disease, and some cancers.

Over a 25-year period, there could be 16,000 fewer cases of type 2 diabetes; 4,400 fewer cases of heart disease; and 1,100 fewer cases of stroke. It is estimated that 1,606 more Australians would be alive in 25 years, with millions of dollars saved in healthcare costs, and that the tax could generate in excess of $400 million (AUD) annually.16 Another economic modelling study has shown that almost 50% of the health care savings generated by a 20% tax on SSBs in Australia would accrue in the most disadvantaged groups.22

Supporters of an Australian tax on SSBs include the Australian Council of Social Services, Australian Dental Association, Australian Medical Association, Australian and New Zealand Obesity Society, Baker Heart and Diabetes Institute, Cancer Council Australia, Consumers Health Forum of Australia, Diabetes Australia, Dental Hygienists Association of Australia, Heart Foundation, Kidney Health Australia, Menzies School of Health Research, National Rural Health Alliance, Nutrition Australia, Obesity Australia, Obesity Policy Coalition, Obesity Surgery Society of Australia and New Zealand, Parents’ Voice, Public Health Association of Australia, Royal Australian College of General Practitioners, Stroke Foundation, and the YMCA.23

A national survey conducted in 2017 showed that 77% of Australians supported a tax on sugary drinks, if the proceeds were used to fund obesity prevention.24

References

1. Obesity Policy Coalition. Policy brief: A comprehensive policy program to reduce consumption of sugar-sweetened beverages in Australia. Melbourne, Australia 2018. Available from: http://www.opc.org.au/what-we-do/pricing-measures
2. World Health Organization Regional Office for Europe. Using price policies to promote healthier diets. Copenhagen, Denmark 2015. Available from: http://www.euro.who.int/en/publications/...
3. Obesity Policy Coalition. Policy brief: The case for a health levy on sugar-sweetened beverages Melbourne, Australia 2018. Available from: http://www.opc.org.au/what-we-do/tipping-the-scales
4. Australian Bureau of Statistics. 4364.0.55.011 - Australian Health Survey: Consumption of added sugars, 2011-12. 2017. Available from: https://www.abs.gov.au/AUSSTATS/...
5. Australian Bureau of Statistics. 4364.0.55.001 - National Health Survey: First Results, 2017-18. 2018. http://www.abs.gov.au/AUSSTATS/
6. Te Morenga L, Mallard S, and Mann J. Dietary sugars and body weight: systematic review and meta-analyses of randomised controlled trials and cohort studies. BMJ : British Medical Journal, 2013; 346:e7492.
7. National Health and Medical Research Council. Australian Dietary Guidelines. Canberra, Australia 2013. Available from: https://www.nhmrc.gov.au/about-us/publications/australian-dietary-guidelines
8. Vartanian LR, Schwartz MB, and Brownell KD. Effects of Soft Drink Consumption on Nutrition and Health: A Systematic Review and Meta-Analysis. American Journal of Public Health, 2007; 97(4):667-675.
9. World Health Organization. Fiscal policies for diet and prevention of noncommunicable diseases: technical meeting report. 2016. Available from: http://www.who.int/dietphysicalactivity/...
10. Australian Tax Office. Sales Tax Bulletin - No. 41. 2000. Available from: http://law.ato.gov.au/...
11. Wright A, Smith KE, and Hellowell M. Policy lessons from health taxes: a systematic review of empirical studies. BMC Public Health, 2017; 17:583.
12. Thow AM, Downs S, and Jan S. A systematic review of the effectiveness of food taxes and subsidies to improve diets: Understanding the recent evidence. Nutrition Reviews, 2014; 72(9):551-565.
13. Teng AM, Jones AC, Mizdrak A, Signal L, Genç M & Wilson N. (2019). Impact of sugar-sweetened beverage taxes on purchases and dietary intake: Systematic review and meta-analysis. Obesity Reviews, 20(9), 1187-204.
14. Chen L, Appel LJ, Loria C, Lin P-H, Champagne CM, et al. Reduction in consumption of sugar-sweetened beverages is associated with weight loss: the PREMIER trial. The American Journal of Clinical Nutrition, 2009; 89(5):1299-1306.
15. Niebylski ML, Redburn KA, Duhaney T, and Campbell NR. Healthy food subsidies and unhealthy food taxation: A systematic review of the evidence. Nutrition, 2015; 31(6):787-795.
16. Veerman JL, Sacks G, Antonopoulos N, and Martin J. The Impact of a Tax on Sugar-Sweetened Beverages on Health and Health Care Costs: A Modelling Study. PLoS ONE, 2016; 11(4):e0151460.
17. Colchero MA, Salgado JC, Unar-Munguía M, Molina M, Ng S, et al. Changes in Prices After an Excise Tax to Sweetened Sugar Beverages Was Implemented in Mexico: Evidence from Urban Areas. PLoS ONE, 2015; 10(12):e0144408.
18. Colchero MA, Rivera JA, Popkin BM, and Ng SW. Sustained consumer response: evidence from two-years after implementing the sugar sweetened beverage tax in Mexico. Health affairs (Project Hope), 2017; 36(3):564-571.
19. Smith E, Scarborough P, Rayner M, and Briggs A. Should we tax unhealthy food and drink? Proceedings of the Nutrition Society, 2018; 77(3):314-320
20. UK Government. Soft Drinks Industry Levy comes into effect. London, England 2018. Available from: https://www.gov.uk/government/news/...
21. Scarborough P, Adhikari V, Harrington RA, Elhussein A, Briggs A, Rayner M . . . White M. (2020). Impact of the announcement and implementation of the UK Soft Drinks Industry Levy on sugar content, price, product size and number of available soft drinks in the UK, 2015-19: A controlled interrupted time series analysis. PLOS Medicine, 17(2), e1003025.
22. Lal A, Mantilla-Herrera AM, Veerman L, Backholer K, Sacks G, et al. Modelled health benefits of a sugar-sweetened beverage tax across different socioeconomic groups in Australia: A cost-effectiveness and equity analysis. PLoS Medicine, 2017; 14(6):e1002326.
23. Rethink Sugary Drink. Media release - Massive treat-y: 10 health organisations join call for sugar tax 2017. Available from: http://www.rethinksugarydrink.org.au/media/...
24. Miller CL, Dono J, et al. (2019). Are Australians ready for warning labels, marketing bans and sugary drink taxes? Two cross-sectional surveys measuring support for policy responses to sugar-sweetened beverages. BMJ Open 9(6): e027962.