There’s nothing sweet about a sugar tax
Governments are growing increasingly concerned about rising obesity rates and the effect this has on a nation’s health in the form of noncommunicable diseases such as diabetes and hypertension.
Likewise, the South African government has identified high obesity rates as a national priority that needs to be urgently addressed. The country is regularly ranked as one of the fattest nations on the continent, with more people expected to die of noncommunicable diseases than of malnutrition.
How to promote a healthier lifestyle is often where the various stakeholders differ.
Some people and organisations believe a tax on sugar should form a part of this response. Their reasoning is that if products to which sugar has been added, such as soft drinks, are taxed – much in the same way as sin taxes are levied on products such as tobacco and alcohol – this would lead to a reduction in people’s sugar intake.
It is a regressive tax that has a far greater negative effect on lower-income earners and, in some cases, has had damaging effects on a nation’s economy. Evidence from around the world shows that a sugar tax is not the most effective way to tackle rising obesity rates.
Also, there is little evidence to link sugar directly to obesity rates. In New Zealand the median daily sugar intake fell between 1997 and 2009, yet obesity rates over that period rose.
Proponents of a sugar tax often cite Mexico as a positive example of how such a tax can reduce the consumption of sugar-sweetened drinks. Recent studies show that this hasn’t been the case. There was an initial decrease in soft drink consumption when the tax was introduced in 2014, but volumes have started rising again.
The Instituto Tecnológico Autónomo de México found in a study after the tax was implemented that it had a minimal effect (less than 1%) on total diet calorie consumption, with no detectable results on body mass index.
This year the United Kingdom’s Institute of Economic Affairs study said consumers respond by migrating to cheaper brands and “inferior goods” rather than consuming fewer calories. “Demand for sugary drinks, snacks and fatty foods is inelastic. People tend to be quite unresponsive to price hikes and do not significantly change their shopping habits,” it concluded.
There is also the potential negative effect a sugar tax could have on the soft drink industry. The Mexican National Soft Drinks Association estimated that 1 700 direct jobs were lost in the soft drinks industry and a further 7 500 jobs were affected in the industry’s value chain. The University of Nuevo Leon said 11 000 industry jobs (up and down the direct industry value chain) were lost because of the tax.
Some might argue that if this is the price a country has to bear to tackle obesity rates then so be it.
But the evidence just doesn’t stand up to scrutiny. Denmark attempted to introduce a “fat tax” on sugar. The Danish government’s goal was to increase the average life expectancy of Danes by three years over the next 10 years. It abolished the tax 15 months after its introduction because it had failed to provide scalable health benefits for the economic damage it caused.
In a study this year, the Denmark Communications Unit found that consumers switched to cheaper varieties of the same product and Danes shopped in neighbouring Germany and Sweden where no such tax was in place.
Another point to consider is that a food or fat tax is disproportionately borne by poorer households. Lower-income families spend a greater proportion of their earnings on necessities such as food. Any increase in the cost of food prices through a tax will hit them hardest.
This was seen in Mexico; a 2016 Oxford Economics and International Tax and Investment Centre report found that 64% of the tax collected came from lower socioeconomic status households and 38% of the tax was paid by people living below the poverty line. The German Federal Ministry of Food and Agriculture said “using punitive food and drinks taxes, which generate political control of consumption and patronise the consumer, should be rejected”.
So what should governments be doing to tackle rising obesity rates? In South Africa it is a complex problem. A one-stop approach in levying a sugar tax will not achieve the government’s objectives in relation to noncommunicable diseases.
There is a great deal of evidence showing that people need better access to information on how to lead a healthy lifestyle. There needs to be a greater focus on diets overall and not on single products. Promoting physical activity is also a crucial part in getting the country healthy.
The food and drinks industry in South Africa has numerous programmes in place to promote healthier lifestyles and better diets. The beverage industry is working with the department of health and the Consumer Goods Council of South Africa in a number of initiatives such as developing a code on marketing to children and nutrition labelling. This co-operation is aimed at addressing health risks and food safety concerns.
The implementation of a sugar tax in South Africa needs to be carefully considered. There are likely to be unintended consequences that need to be understood before the tax is implemented. But the main reason such a tax is unlikely to succeed is evidence from multiple countries that has shown it does not reduce calorie intake.
To do that, people need to be better informed about what constitutes a healthy lifestyle and balanced diets and understand the benefits of exercise.
Mapule Ncanywa is the executive director of BevSA, an industry association that represents the collective interests of nonalcoholic beverage manufacturers