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NUTRIDATE

Volume 33, Issue 3, 2022

NUTRIDATE

Volume 33, Issue 3 2022

The case for sugary drink taxes in Australia

Dr Christina Zorbas, VicHealth, Deakin University

Improving the healthiness of population diets remains one of the biggest global challenges of the 21st century. Diets that are not conducive to good health are currently among the biggest risk factors for premature death and disability. Unhealthy diets are inextricably linked with the food industry’s production of food and drinks that are highly processed, nutritionally poor and cheap, underpinned by heavily invested interests and relentless marketing. To address the problem, some governments are succeeding with sugary drink taxes. 

Figure 1: Population health is being eroded by the processed food and drink industry.

The need to improve population diets for all

Figure 2: Proportion of total burden of disease contributed by five leading risk factors in Australia

Source: AIHW Australian Burden of Disease Data, 2018

In 2018, four out of the five leading risk factors for disease in Australia were linked to dietary factors (Figure 1). Dietary factors or dietary risks refer to nutrients or diet patterns that often result in non-communicable diseases such as heart diseases, type 2 diabetes, and many forms of cancer (Table 1). Of further concern is how diet-related diseases are more prevalent among those who experience social disadvantage – also known as priority populations – thereby driving health inequalities within and between countries. Indeed, dietary risks are more prevalent among low compared to high socioeconomic groups in high-income countries, and deaths from diet-related illnesses are more prevalent in low- and middle-income compared to high-income countries.

Table 1.15 dietary risks that lead to premature death and disability through non-communicable diseases such as heart diseases, type 2 diabetes, and many cancers

Diets low in:Diets high in:
Whole grainsExcess salt
Fruits
Trans fats
Nuts and seedsSugary drinks (i.e., sugar-sweetened beverages)*
VegetablesProcessed meat
Seafood omega-3 fatty acidsRed meat
Fibre
Polyunsaturated fatty acids
Legumes
Milk

Sugary drinks are one dietary risk that offer negligible nutritional benefits. They are defined as non-alcoholic water-based beverages that contain added caloric sweetening such as sugars and commonly include soft drinks, cordials, flavoured waters, sports drinks, and fruit drinks. The high sugar and energy content of these drinks means that their excessive consumption increases the risk of ill-health from heart disease, diabetes, weight gain, and dental caries and erosion. To minimise the risk of these health issues, the World Health Organization and national dietary guidelines recommend limiting our intake of free and added sugars, including sugary drinks. 

Figure 3: Sugary drinks present high risk for chronic disease with virtually no nutritional benefits.

While sugary drinks are no longer increasing in some parts of the world, their widespread and inequitable consumption (i.e., higher amounts consumed among lower compared to higher socioeconomic groups and countries) makes them an important target when it comes to improving public health. 

Unhealthy diets have become prominent worldwide over the last three decades due to globalisation (i.e., the increased international reach and influence of businesses such as the food and drink industries). Unhealthy products, such as sugary drinks, can be found and purchased virtually everywhere we go. Not only are these options readily available, but they are also cheap and heavily marketed in the food environment – making them particularly appealing to vulnerable priority groups, such as children and people receiving low incomes. Our research demonstrates that most people think healthy diets are more expensive than unhealthy diets. One person that we have spoken to in the community described how:

“It gets me a bit with the cost side of things – where you go to (a fast-food chain) and you can get one of those crazy big frozen cokes for $1.00. Like the large one is $1.00. Whereas water might cost you $3.00 or something like that. Like, it’s people getting penalised for wanting to be healthier.” (Chung et al. p. 102. 2019)

Our research has also shown that sugary drinks are frequently on special (i.e., price promoted or price discounted). Across the two major Australian supermarkets (between November 2016 and November 2017), we found that nearly half of the weekly drink specials were for sugary drinks and that sugary drinks were more likely to be on special and discounted to a greater degree than healthier options (i.e., milk and water). In New Zealand, we found that 64% of sugary drink purchases were made on special, with similar trends observed for low, middle, and high socioeconomic groups.

Figure 4:Tackling price as a key driver of dietary risks

In 2019, an analysis across a sample of 150 countries further confirmed that the price of sugary drinks influences the extent to which they are consumed and impacts health. As sugary drinks became more affordable within a country, the prevalence of overweight and obesity increased. If we are to improve population diets across all socioeconomic groups, there is an urgent need to rebalance food and drink pricing so that healthy diets are more economically appealing than unhealthy diets, for all.

Rebalancing food and drink pricing using population policies

To prevent diet-related non-communicable diseases, the World Health Organization has released several evidence-based recommendations for implementing a comprehensive package of government-led food policies. These policies are needed to create healthier food environments, for example, by ensuring that sugary drinks are not widely promoted or cheaper than healthier alternatives such as water and milk. The adoption of sugary drink taxes by national governments is one priority policy recommendation that has widely been advocated for by public health groups. It is important to note that government tax reforms (like sugary drink taxes) do not just intend to raise prices but are also used to raise revenue to fund the implementation of policy actions for the public good. In Australia, taxes are meant to be grounded in economic prosperity, fairness and resilience principles. 

Designing sugary drink taxes

Sugary drink taxes can be designed in various ways. Whilst they should fit the context of each country, the World Cancer Research Fund and the World Health Organization have found that effective taxes share a few things in common:

Nutrition criteria are used to identify which of a country’s local sugary drinks should be taxed. Sugary drink taxes should cover a broad suite of drinks that contain a certain amount of sugar (e.g., soft drinks, energy drinks, flavoured waters, fruit drinks, etc.). 

Sugary drink taxes should be applied according to a drink’s sugar content or volume (i.e., specific excise taxes are applied according to the amount of sugar in a product: $ per gram of sugar). These types of taxes can increase the price of products more than other types of taxes (thereby reducing the extent to which they are purchased) and encourage major drink companies to reformulate (i.e., reduce the sugar content in) their products. Other tax options include ad-valorem excise taxes (i.e., taxing as a percentage of the cost of a product, e.g., 30% increase in price), value-added taxes (i.e., taxes applied to stakeholders across the supply chain), import taxes (i.e., applied on imported goods) and sales taxes (i.e., collected by retailers at the point-of-sale) (7).

The World Health Organization recommends that sugary drink taxes should increase the price of sugary drinks by at least 20% to effectively reduce population-level consumption by 20%. Nevertheless, governments should monitor and increase their taxes over time. 

Taxes should be applied at the producer level. This typically results in producers increasing the price of sugary drinks. It also makes it easier for governments to collect tax revenue.

Finally, taxes should be earmarked (i.e., put aside and used for a specific purpose) and reinvested into public health initiatives (e.g., promoting healthy diets, especially among priority populations). Evidence suggests that this can increase public support for taxes.

Evidence of tax successes: case studies from around the world

More than 45 jurisdictions have now implemented taxes on sugary drinks as part of their efforts to improve population nutrition. Based on 17 of these taxes, research has found that a 10% sugary drink tax reduces the consumption of sugary drinks across the target population by 10%. Below, we describe three case studies in more detail.

Mexico (2014): The implementation of the Mexican sugary drinks tax (i.e., a tax of one peso per litre) is thought to have promoted the adoption of this policy action globally. It enabled the generation of evidence that has since encouraged key stakeholders of the effectiveness of sugary drink taxes in reducing consumption. Studies have estimated that the consumption of sugary drinks decreased by 6% on average one year following the implementation of the tax and that this was sustained after two years (i.e., a 10% decrease). The decreased consumption of sugary drinks has also been found to be greatest for Mexican families with the lowest socioeconomic position (who consume higher amounts of sugary drinks). 

Berkeley, US (2014): After strong advocacy efforts by civil society, which were met by lobbying by drink companies, the City of Berkeley became the first place in the US to adopt a sugary drink excise tax of one cent per ounce. Compared to other US cities that did not implement a sugary drink tax, it was estimated that sugary drink consumption declined by 21% in Berkeley four months after the sugary drinks tax was implemented and by 52% after three years. 

UK (2018): The UK Soft Drinks Levy applies to any drink with at least five grams of added sugar. Two excise taxes levels (of 0.18 and 0.24 British pounds per litre) are applied to drinks with 5-8 grams and ≥ 8 grams of added sugar per 100mL, respectively. Recent evidence suggests that sugary drink purchases have declined by approximately 10% per week since the implementation of the levy, with few financial impacts on sugary drink companies. 

Barriers and facilitators to implementing sugary drink taxes

The World Cancer Research Fund released a report in 2018 to summarise the key lessons learnt from implementing sugary drink taxes worldwide. This evidence is particularly relevant to countries such as Australia that lack political will and have ongoing industry interference with the adoption of food policies. 

Barriers:

  • Lack of food industry regulation for public health 
  • A common belief that food choice is a ‘personal responsibility’ and governments should not intervene
  • Anti-tax pushback and legal challenges from the drinks industry (e.g., $US 2 million invested by industry to fight the Berkeley sugary drink tax) (39)
  • Inadequate relationships between public health groups and government officials 
  • Issues with policy design (e.g., does not include all sugary drinks)
  • Lack of resources to enforce (especially in low- and middle-income countries)

     

Facilitators:

  • Engage civil society and different government sectors (e.g., trade, finance, and health) to develop unified support for sugary drink taxes
  • Public and political clarity on the aims of the tax (i.e., to improve public health)
  • Effective public health problem framing (e.g., earmarking the ‘levy’ revenue for public health initiatives) 
  • Gather evidence from the local context (e.g., local health statistics on the prevalence of childhood obesity) 
  • Effective political campaigning, including by prominent public groups

Conclusion

A wealth of evidence from around the world now supports the implementation of sugary drink taxes. Yet, many governments struggle to overcome the strong industry opposition against implementing such food and drink policies. If we are to improve the diets and health of future generations, regardless of their socioeconomic positioning, stronger leadership and collective action are required to continue challenging the status quo of unhealthy food environments. 

Student activities

  1. Why is it important that people consume healthy diets and reduce their consumption of sugary drinks?
  2. What is globalisation?
  3. What role has globalisation had on our food environments and what people consume?
  4. How does price influence the healthiness of foods and drinks that are purchased and consumed?
  5. Describe one type of sugary drink tax and how it can improve population diets.
  6. At what rate does the World Health Organization recommend that sugary drink taxes be implemented?
  7. List 2 jurisdictions that have implemented a sugary drink tax. A full list can be found here.
  8. What does it mean to earmark a tax? Give an example of how a sugary drink tax should be ideally earmarked.
  9. Describe the key reasons most countries have struggled to implement sugary drink taxes.
  10. What next steps could we take to encourage the adoption of a sugary drink tax in Australia?

     

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