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Tax on sugar sweetened beverages

Tax on Sugar Sweetened Beverages

Executive Summary

A quickly rising public hazard of our time is the increase in consumption of added sugars. Although biology clearly explains that our body responds to natural and added sugars equally, we must recognize that foods that naturally contain sugars provide healthy components to the body while foods containing added sugars simply add calories and provide little or no healthy components to the body. Since 2008, a substantial effort has been made to reduce the consumption of sugar-sweetened beverages (SSBs) (1).Scientific literature also supports the correlation between consumption of SSBs and obesity, chronic illness and increased weight. Various nations and cities have launched health campaigns on SSBs and proposed policies to reduce their availability.

The government supported actions in different sectors are needed to curb the increasing obesity rates in order to avoid unsustainable burdens on the countrys economy and health system. One of the ways to achieve this is taxing. Taxing SSBs has been proposed in 24 countries and six cities, while 25 national organizations have endorsed it.

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This brief discusses the need for action to discourage the heavy consumption of SSBs and provides recommendations that can help address the problem. The brief will also explain the proposed tax on these products. There are four key points that must be addressed when discussing sugar-sweetened beverage tax (SSB). They are:

Scope of SSB taxes definition

Type of tax on SSB

Rate of the Tax

Use of the tax revenue incurred on SSBs

There has been a dramatic increase in the consumption of sugar-sweetened beverages in Australia with children consuming 448 ml of sugar-sweetened beverages per day. The trends in sales and consumption of these sugar-sweetened beverages force the public health and government control paradigms to address the health consequences of these products.


Poor diet and obesity significantly add to Australia’s disease and injury burden, yet the rates continue to soar. These rates are high across all age groups and demographics. Obesity and excessive weight issues are a result of the imbalance between energy intake and energy expenditure. People have been consuming more energy, which they have not utilized. Evidence shows that these drinks stimulate appetite, causing people to consume more energy from other sources.

The obesity rates in Australia are estimated to be the eighth highest among the OECD countries. It is not surprising that these rates soar, because the population keeps consuming energy dense, high fat, high sugar foods and beverages. Young Australians, in particular, are common consumers of burgers, chips, and sodas on a regular basis.

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According to a survey by the Australian National Childrens Nutrition, 47% of children between the ages of 2 and 16 consumed sugar-sweetened beverages on a daily basis. The means that the daily intake of this age group was 1.2 cans per day, with sports drinks having a higher consumption rate. The consumption among adults was reported to be 2.1 cans per day (2). Male young adults between the age of 19 -24 consume more sugar-sweetened beverages as compared to females in the same age group.

In America, 16% of the total calories consumed are added sugars. The bulk of these added sugars (36%) come from soda, sports drinks, energy drinks and another 11% from fruit drinks (3). Apart from obesity and diabetes, the high consumption of SSBs can contribute to high dietary glycemic load and, therefore, result in inflammation and impaired B-cell function.

If the obesity situation in Australia is not resolved, the numbers will become quite worrying by 2025. 83% of males and 75% of females under the age of 20 will be obese. This trend is shocking, considering the fact that the risk of type 2 diabetes is greater to consumers of sugar-sweetened beverages by 26% 2.Consequently, this will have a ripple effect on the workforce participation, healthcare spending, chronic health conditions, and the overall quality of life.

The Argument for Taxing SSBs

Imposing taxes on certain products is one of the best strategies to stimulate change in health attitudes. An example is the tax imposition on tobacco to discourage smoking and, thus, reduce complications associated with smoking. Taxing SSBs would have a similar effect (4).

Scope of Scope of SSB Tax Definition

Sugar-sweetened beverages are drinks that have increased caloric sweeteners. These include fruit drinks, soft drinks, sports drinks, sweet tea, sugar cane drinks, rice drinks, bean beverages, malt beverages, horchata, and non-alcoholic wines. These drinks have contributed to the obesity epidemic. The tax can be broad to cover all the products or narrowly target specific ones. Such a tax should be developed to make clear which type or types of SSBs are handled.

Type of Tax on SSB

SSB taxes can either be excise or sales tax. Sales taxes are levied as a percentage of the price of the product while excise taxes are levied per ounce of measurement of the product. They both have their merits and lack thereof. However, the excise taxes are more likely to alter the behavior of consumers. Excise taxes are not dependent on the price of a product as they are imposed on the units of products. A sales tax would simply encourage the consumer to switch to an alternative that is less expensive.

There are many countries levying taxes on such products, but they have not effectively been able to reduce the consumption of these drinks as the taxes are too low. To achieve both reduced consumption and an increase in substantial tax contribution, experts propose a national per ounce excise tax on drinks containing caloric sweeteners. This is more likely to discourage the consumption beverages with added caloric sweeteners.

Rate of the Tax

Studies indicate that products such as SSBs are highly elastic to price. An increase in price by 10% will automatically have an 8% reduction in quantity demanded. This means that they are very responsive to price changes and, therefore, the rates can be adjusted depending on the policy goals and national economic concerns. Hence, the government can impose a 10% -12% tax rate.

Use of the Tax Revenue Incurred on SSBs

The taxes levied can be used by the government to collect the much-needed revenue, which can be spent on programs targeting the childhood obesity epidemic in the country (5). For instance, they can be used to provide subsidies for healthy foods so as to promote their consumption instead of the fatty and sugary foods, especially in households in the low-income bracket.

While these taxes would provide a very good solution to the reduction of obesity rates, objections would undoubtedly arise. Some will say that the introduction of such taxes is regressive and that the government should not get involved in personal decisions of consumers. They would also claim that SSBs are not similar to tobacco or alcohol and should therefore not be treated as harmful substances. Some would doubt whether it would be a good solution to the obesity problem.

Considering these opinions, one should take into consideration that consumers are not well educated on the potential of these substances to cause obesity. The marketing strategies of these companies are not reliable in terms of promoting consumer education. SSBs are not necessary for survival, and although overconsumption of SSBs is not the only reason for obesity, imposing taxes is a significant part of the solution (6).

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Imposing tax that will have significant impact

The government of Australia is responsible for responding to national health crises and ensuring that public health is protected. Therefore, in case the whole country is involved, the government is best placed to handle the issue. Hence, the recommendation in the imposition of a tax on sugar-sweetened beverages. Taxing are very much likely to be a great contributor to revenues directed towards public health. Before implementing the tax, some key considerations need to be well advised. One, the tax imposition must be very clear on the type of products it is willing to target. Noncaloric sweeteners like diet soda give an illusion of no sugar, but they also feed high energy to consumers. So the taxes imposed must also look into the avenues which will consequently increase the revenue earned.

According to the information on the tax levied, it is clear that the levy imposed should be excised as it will have a greater effect on the consumption of products. If the excise levy is imposed, there should be controls and monitors to adjust the tax rate so that it is not overtaken by factors such as fluctuation. The high price on SSBs should not erode over time. This also keeps the potential revenue collected steady.

The taxes collected should have very visible actions. For instance, the government can invest the revenues in improving the built in the environment so that physical activity can be promoted. The government can also use the revenues in educating consumers in comprehensive obesity prevention programs7. Alternatively, the government can target the children directly and engage schools to promote healthy eating.

Have Rigorous Social Marketing Campaigns

The imposition of tax on the SSBs is good, but acceptance of the tax by the public is key. Polls indicate that support for taxes will increase if the revenue is dedicated to promoting the reduction of obesity cases. However, even before that, the public needs to be educated, and this information has to be shared through effective marketing campaigns. The social media marketing campaigns would highlight the impact of consuming these SSBs and try to encourage people to reduce the consumption of such products.

It is clear that the intense advertising of sugar-sweetened beverages impacts the consumption decisions among children. The Australian government could reduce the exposure of children to marketing sugar-sweetened beverages and drive these campaigns away from schools. Even more directly, the Australian government can introduce comprehensive restrictions to the sale of sugar-sweetened beverages in schools. These comprehensive restrictions should apply to the sales of products containing caloric sweeteners in places where children spend time such as parks, playgrounds, and schools. These restrictions should be backed up by effective implementation, monitoring, and evaluating resources. The schools targeted should include all learning institutions so as to curb obesity rates in all age groups.

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Among adults, social settings like workplace cafeterias are the triggers of consuming SSBs. The government might also want to consider reducing the availability of sugar-sweetened products in places of work like government and health institutions. In most cases, people are attracted by what they see, and SSBs are everywhere. Therefore, replacing them with other healthier options might reduce the calorie intake.

Research indicates that obesity rates increase due to people being lax nowadays and doing fewer activities. Children no longer engage in physical exercises that can help them use up the energy gained from consuming the high energy drinks. Thus, it is a duty of the teachers to ensure that physical activities are included in the curriculum to promote the culture of exercising even from an early age.

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It is clear that a failure to address issues can exacerbate the health crisis in Australia connected to the increase in SSBs intake among children and young adults. The science is also clear. SSBs contribute to an array of health complications including diabetes, obesity, and other health problems. Taxing SSBs will be a great means of reducing the consumption of SSBs and simultaneously increasing government resources, which can be dedicated towards activities promoting healthy eating and other beneficial programs. Public support for such measures is very significant for manifesting impact.