Taxes on sugary drinks seem to work according to plan

Taxes on sugary drinks seem to work according to plan

As governments and the beverage industry battle over taxes on sugary drinks all around the world, The Economist, in this week’s print edition, sees evidence for these tariffs to work according to plan: Stopping slurping – Taxes on fizzy drinks seem to work as intended.

Governments are adopting taxes on sugary drinks in the hope of reducing obesity and slowing the rise in diabetes. Hungary has been taxing them since 2011, the French since 2012, and the Mexican government followed suit last year, to name only a few. Some worry about the effect on the consumer, arguing that big retailers will simply refuse to pass the tax on to their customers by absorbing it themselves. Yet recent French[1] and Mexican[2] studies show that retailers passed on nearly all of the French tax to their customers, while in Mexico retailers raised the prices for fizzy drinks by 30% more than the real value of the tax.

The raised prices have in return minimised demand for sugary drinks. According to a Mexican monthly manufacturing survey overall sales of fizzy drinks fell by 1.9% in 2014, compared to a 3.2% increase per year over the previous three years. A study based on household surveys observed a 6% fall in the consumption of sugary drinks relative to pre-tax trends over the tax’s first year. According to other data Mexicans seem to opt for healthier alternatives instead as the manufacturing survey shows that sales of bottled water increased by 5.2 % in 2014.

Sugar intake is one of the main catalysts of the rising NCD burden in the Asia-Pacific-Region as well. As NCDAPA has pointed out before, taxation of sugary drinks and other unhealthy products is a low-cost solution for minimizing the consumption of unhealthy products, while at the same time allocating domestic financial resources to the fight against NCDs.

Originally trained as a medical physician, Dr. Rodriguez-Fernandez serves as the Global Medical Director of Non-communicable Diseases (NCDs) for International SOS. He also currently serves as the Executive Director and Founder of the NCD Asia Pacific Alliance.

[1] Working paper by economists at the French Central Bank, Sorbonne, University Paris-Est Créteil

[2] Working paper by Raymundo Campos-Vázquez and Eduardo Medina-Cortina of the Colegio de México

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