Do sugar taxes work?

Abstract

Food Science and TechnologyVolume 35, Issue 3 p. 26-29 FeaturesFree Access Do sugar taxes work? First published: 16 September 2021 https://doi.org/10.1002/fsat.3503_6.xAboutSectionsPDF ToolsExport citationAdd to favoritesTrack citation ShareShare Give accessShare full text accessShare full-text accessPlease review our Terms and Conditions of Use and check box below to share full-text version of article.I have read and accept the Wiley Online Library Terms and Conditions of UseShareable LinkUse the link below to share a full-text version of this article with your friends and colleagues. Learn more.Copy URL Share a linkShare onFacebookTwitterLinked InRedditWechat Jean Adams, Richard Smith and Martin White explain the early impacts of the UK's Soft Drinks Industry Levy on consumer purchasing behaviour, sugar consumption and the soft drinks industry in the UK. Why tax sugary drinks? The World Health Organisation recommends taxes on sugary drinks to help prevent chronic illnesses, such as cardiovascular and respiratory diseases, cancer and diabetes. Taxes on sugary drinks are part of a growing suite of dietary public health policies that recognise the substantial influence of the contexts in which people live on what they eat. Availability, affordability and marketing of food and drinks are all important drivers of diet. Making healthier food more available, relatively more affordable and higher profile than the alternatives, should make it easier for people to eat healthier diets. Sugary drinks are an attractive food group to tax for both public health and policy reasons. Many people consume too much sugar and sugary drinks are a substantial source of this sugar. For example, in the UK, average sugar intake is more than twice the recommended maximum levels. There is also strong evidence that people who drink more sugary drinks weigh more and are more likely to gain weight and develop type 2 diabetes and dental decay. In the UK, weight-related conditions alone account for around 10% of the health service budget. This all provides a compelling rationale for taking public health action to reduce sugary drinks consumption. Sugary drinks are also relatively easy to define, often offer no or little nutritional benefits, and in many countries tap water is a freely available, healthy alternative. This means that policies targeting sugary drinks are less likely to have confusing loopholes or lead to unintended consequences, such as inadvertently decreasing consumption of healthier nutrients. In the UK, average sugar intake is more than twice the recommended maximum levels. Impacts of sugary drinks taxes around the world At least 44 countries and eight US cities have now introduced taxes on sugary drinks (Figure 1). These taxes vary substantially – some are charged to businesses on sales made, others are levied directly on consumers; some add a specific amount per volume of drink (e.g. the 1 peso per litre tax in Mexico), while others are based on the value of the product sold (e.g. the 50% tax in Saudi Arabia). In a few countries, sugary drinks taxes are based on the sugar content of drinks (e.g. in South Africa drinks are taxed 0.021 ZAR for each gram of sugar per 100ml above 4g/100ml). Figure 1Open in figure viewerPowerPoint Sugary drinks taxes around the world Updated April 2021 (https://tinyurl.com/3phfz64) There is now substantial evidence that sugary drinks taxes lead to decreases in purchasing of taxed drinks. A recent systematic review brought together international data, scaling results from different taxes to a standard 10% rate. Overall, a 10% increase in the tax on sugary drinks was associated with a 10% reduction in purchases and consumption of taxed drinks1. It is often assumed that taxes on sugary drinks achieve health benefits through changes in price: taxes will increase the price of sugary drinks to consumers leading to fewer purchases, less consumption and improvements in diet and health. Whilst sugary drinks taxes do tend to increase prices2, there is also growing evidence of other pathways that influence consumer behaviour – particularly through a ‘signalling’ mechanism. By taxing sugary drinks, it is proposed that governments send a message to citizens that they should be avoided. For instance, in Barbados, both sweetened fruit drinks and traditional soda were included in the 2015 tax. Whilst the price of both categories increased following the tax, only purchases of sodas decreased. Further exploration revealed that although consumers were clear that there was a tax on soda because it was unhealthy, they were more uncertain about the health implications of sweetened juice drinks3. Advertising of sweetened juice drinks reinforced this confusion – repeatedly describing them as ‘natural’, ‘nutritious’ and with ‘way less sugar’. The Barbados experience makes it clear that price increases alone may not be enough to achieve health benefits from sugary drinks taxes. How taxes are communicated by governments and the media, how they are perceived by citizens, their impact on consumption of other substitute products, and how drinks companies respond to the taxes in terms of price changes, marketing and products offered may all play a role in whether and how sugary drinks taxes impact dietary public health. A unique approach in the UK The UK's Soft Drinks Industry Levy (SDIL) was announced in March 2016 and implemented in April 2018 (Table 1). When it was first announced, the SDIL was unique in its focus on achieving industry reformulation rather than changing consumer behaviour. Instead of increasing the price of drinks, the SDIL explicitly aims to change the nature of what drinks are available to consumers through reformulation. Three design features reflect this intention: 1. the SDIL is charged on soft drinks manufacturers and importers, rather than consumers; 2. it is tiered, with the most sugary drinks taxed the most, and the least sugary not taxed at all; 3. the SDIL was announced in March 2016, two years before it came into effect in April 2018, giving the soft drinks industry time to adjust. THE UK SOFT DRINKS INDUSTRY LEVY (SDIL) • Imposed on manufacturers and importers, not consumers • Announced two years before implementation to allow industry time to adapt • Tiered according to sugar content • Drinks >8g sugar per 100ml charged £0.24 per litre (high levy tier) • Drinks >5g, but less than 8g, sugar per 100ml charged £0.18 per litre (low levy tier) • Drinks <5g sugar per 100ml not charged (no levy tier) • Exemptions for alcoholic drinks, milk-based drinks and pure fruit juices, irrespective of sugar content • Revenue raised to be spent on school sport and school breakfast clubs Whilst it is, of course, important to understand the impact of the SDIL on purchasing and consumption of soft drinks, research has also explored a number of other aspects of the SDIL including public acceptability, impacts on drinks companies’ turnover and value, and impacts on the price, sugar content and product size of the soft drinks on UK supermarket shelves. Public support for sugary drinks taxes Sugary drinks taxes can only be achieved through local or national government action. This means that political support has an important influence on whether taxes are implemented. Political support is obviously influenced by public support, making this another influence on tax implementation. Public support is both shaped and reflected by the media. Following public backlash, Chicago's sugary drinks tax was repealed just a few months after it was implemented, showing that public and political support can affect not just tax implementation, but also long term maintenance. In the UK, the Prime Minister instigated a ‘review of sin taxes’ a year after the SDIL was implemented, which ultimately left the SDIL unchanged, but could have spelt its downfall. In a recent systematic review of international evidence, public support for hypothetical sugary drinks taxes was around 42%4. In November 2017 – 20 months after the SDIL was announced but four months before it was implemented – 70% of adults supported the SDIL when informed that it was intended to encourage reformulation and that revenues would be spent on school sports and breakfast clubs5. Public support for sugary drinks taxes is consistently higher when health promoting intentions are made clear and support for implemented public health policies tends to be higher than for hypothetical ones. These two observations may explain why support for the SDIL is much higher than support for other hypothetical taxes on sugary drinks. High levels of public support for the SDIL are also reflected in more supportive than oppositional media discussion of the levy6. Oppositional reporting has focused on soft drinks as the wrong target for dietary public health policy action and suggested that taxes are unfair, regressive and likely to harm UK-based soft drinks companies. However, soft drinks manufacturers and retailers have also positioned themselves as ‘part of the solution’, reinforcing public health advocates’ united messaging around the scale of the dietary public health challenge in the UK and the importance of regulatory action to achieve substantive change. Success of the Soft Drinks Industry Levy The SDIL was very successful in achieving its aim of encouraging reformulation, changing the sugar profile of the UK soft drinks’ market. In September 2015, six months before the levy was announced, 52% of SDIL eligible soft drinks (i.e. those not in exempt categories) contained more than 5g of sugar per 100ml and would have been taxable. By February 2019, 10 months after implementation, only 18% of eligible drinks contained more than 5g of sugar per 100ml (Figure 2)7. Comparable figures for drinks in exempt categories were 68% in September 2015 and 60% in February 2019, showing that the effect was focused on eligible drinks. Figure 2Open in figure viewerPowerPoint Trends in the proportion of SDIL eligible (top) and exempt (bottom) drinks in the high (pink), low (yellow) and no (green) levy tiers; Sept 2015 – Feb 2019[7] Before the SDIL was announced, there was a large group of SDIL eligible drinks with less than 1g of sugar per 100ml, but there were few other obvious peaks in sugar concentration across the UK soft drinks market (Figure 3). After implementation, there were clear new peaks in drinks with just less than 5g and 8g of sugar per 100ml – the cut-offs for the low and high levy tiers respectively. These new peaks suggest that the reformulation was directly in response to the levy. Changing the levy sugar thresholds could lead to further reformulation. Figure 3Open in figure viewerPowerPoint Distribution of sugar concentration in SDIL eligible soft drinks before announcement (left) and after implementation (right) of the SDIL[7] The SDIL also led to changes in both price and volume across the UK soft drinks market. However, these were not as clearly targeted on levy eligible drinks as changes in sugar content. Manufacturers and retailers may have taken the opportunity provided by the SDIL to rethink their whole offering. Effects on purchasing of sugar in drinks Household purchasing data has been used to explore the impacts of the SDIL on what soft drinks are bought. Twelve months after implementation of the SDIL, households in Great Britain had not changed the volume of soft drinks that they purchased, but there was a 30g (10%) per household per week reduction in the sugar from soft drinks than would have been expected from pre-announcement trends8. This change is equivalent to each person replacing one 250ml serving of a drink containing 5g of sugar per 100ml per week with a sugar-free replacement, reducing their sugar consumption from drinks by 12.5g per week. The reduction in sugar content, but not volume of soft drinks purchased reflects the reformulation seen in the market. The recipes of many soft drinks were changed following the SDIL, with sugar partially or totally replaced with artificial sweeteners. This meant there was no requirement for consumers to change what they bought to benefit from the reduced sugar content of soft drinks. It may also show that the SDIL has the capacity to improve dietary public health (in terms of sugar reduction from drinks purchased) without obviously harming soft drinks companies (in terms of maintained volume of sales). Two different modelling studies have estimated the impact of the SDIL on health outcomes. Whilst both were conducted before the SDIL was implemented, their assumptions of the impacts on purchasing (and hence consumption) were similar to those reported above. The first study assumed a reduction in sugar from drinks of between 7 and 38g per person per week and found this would lead to 0.2-0.9% fewer individuals with obesity and 0.8-4.4 fewer new cases of type 2 diabetes per 1000 person-years in the UK9. The second assumed a reduction in consumption of sugary drinks of 21-31% and found this would prevent 370 deaths from coronary heart disease each year in England10. Overall, the effects of the SDIL on purchasing are commensurate with small, but important, changes in health outcomes. Impact on soft drinks companies It has been claimed that taxes on sugary drinks harm soft drinks companies, impacting negatively on local and national job markets and economies. Although evidence from Mexico and the USA suggests that sugary drinks taxes have no discernible impact on employment, media reporting following the announcement of the SDIL restated its harmful economic potential. Analysis of stock market value associated with announcement of the SDIL found brief negative impacts in the 24 hours following the announcement, which recovered within 48 hours (Figure 4)11. Other subsequent announcements concerning details of the levy had no impacts on stock market values. Analysis of domestic soft drinks turnover data revealed a short-term negative impact of the SDIL announcement that had recovered by the time of implementation12. Figure 4Open in figure viewerPowerPoint Daily changes in stock market returns of UK soft drinks companies around announcement of the SDIL (day 0); statistically significant abnormal returns are labelled with markers[11] The extent of reformulation in the UK soft drinks market following announcement of the SDIL (and illustrated in Figures 2 and 3) indicates that soft drinks companies did adapt to the levy. This adaptation appears to have had some short-lived negative impacts on turnover. Nevertheless, there is little evidence of long-term economic impacts of the SDIL on UK soft drinks companies, which have continued to see growth in turnover. Conclusions Overall, the UK's SDIL seems to be a continued success story, achieving public health benefits without obvious long-term harm to soft drinks companies. Unlike many other taxes on sugary drinks, the SDIL was explicitly designed to incentivise companies to remove sugar from their drinks. Brits largely supported this approach to taxation. Substantial reformulation was achieved and led to significant reductions in the sugar content, but not volume of, soft drinks purchased by British households. This reduction in sugar is likely to be associated with meaningful decreases in obesity, diabetes and heart disease. By adapting to the SDIL, soft drinks companies were able to maintain volume sales and avoid any long-term impacts on turnover. There is much still to learn about the SDIL. Consistent increases in the prices of taxed drinks were not observed indicating that this was not the prime mechanism by which changes in purchasing were achieved. It is possible that all of the changes in purchasing seen were due to reformulation, but changes in consumer behaviour due to ‘signalling’ cannot be ruled out. Reformulation through replacement of sugar with artificial sweeteners appears to have been successful in many cases but the long-term health impacts of this have been queried. Other sugary drinks taxes have led to greater impacts in less affluent groups. When the mechanism of effect is primarily a price one, it could be argued that these taxes are ‘regressive’, but this is unlikely to be the case in the UK. Longer term impacts on health appear promising but are yet to be achieved. Jean Adams1, Richard Smith2 and Martin White3 Jean Adams is a Senior Lecturer in Dietary Public Health and Programme Leader in the Population Health Interventions programme at the MRC Epidemiology Unit. Her research focuses on population-level influences on, and interventions to improve, dietary public health. 1 MRC Epidemiology Unit, University of Cambridge, UK Email jma79@medschl.cam.ac.uk Web mrc-epid.cam.ac.uk/people/jean-adams/ 2 College of Medicine and Health, University of Exeter, UK Email rich.smith@exeter.ac.uk Web medicine.exeter.ac.uk/people/profile/index. php?web_id=Richard_Smith 3 MRC Epidemiology Unit, University of Cambridge, UK; Email martin.white@mrc-epid. cam.ac.uk Web mrc-epid.cam.ac.uk/people/martin-white/ References 1Teng, A.M., Jones, A.C., 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: 1187- 204Google Scholar 2Cawley J, Thow AM, Wen K, Frisvold D. 2019. The Economics of Taxes on Sugar-Sweetened Beverages: A Review of the Effects on Prices, Sales, Cross-Border Shopping, and Consumption. 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