Sugar taxes: The global picture

In recent years the US has been a key battleground for sugar taxes, with numerous states fighting for or against their introduction. But much of the activity has now shifted to other countries: with Malaysia, Italy and the UAE among those introducing a tax.

Tackling obesity is a pressing concern for many governments, and sugar taxes often look like an appealing solution. Proponents see taxes as a way to increase soft drink prices and thus curb consumption, encourage manufacturers to reformulate, and also create a revenue stream for public health initiatives.

But opponents say there is a lack of hard evidence that sugar taxes are effective - with it often hard to prove cause and effect - saying they cost jobs in the industry and hit the poorest the hardest. 

Sugar taxes are generally applied specifically to sugar-sweetened beverages, although the rules vary from market to market. Juice and dairy drinks, for example, sometimes benefit from an exception thanks to their nutritional value, but this is not always the case.

Here, we take a look at some of the markets where sugar taxes have hit the headlines. Please note this is not intended as a comprehensive summary: rather, it seeks to put the spotlight on markets where sugar taxes have been introduced or are under debate.

United States

Although sugar taxes appeared to be gaining momentum in the US a few years ago (soda taxes are in force in Boulder, Albany, Berkeley, Oakland, San Francisco, the Navajo Nation, Philadelphia, and Seattle), progress has stalled in recent years.

Arizona , California and Michigan passed bills to pre-empt any new local beverage or food taxes for a fixed number of years, residents in Santa Fe rejected a soda tax, and government officials in Cook County Illinois repealed a soda tax.

Voters in the 2018 midterms in Washington State also supported a ballot measure that would institute a pre-emptive ban on new soda taxes (it doesn’t affect the existing law in Seattle), although voters in Oregon rejected a similar proposal.

Meanwhile, AB-766, a bill proposing a ban on the sale of jumbo-sized sodas in California, was pulled from consideration earlier this year.

While the governor of Connecticut signaled his support for a statewide tax on sugary drinks in February 2019, this has since moved off the agenda, although there has been some recent activity in Washington DC, via a bill (23-495) that would levy a 1.5 cent-per-ounce excise tax on sweetened beverages.

Health advocacy groups have also welcomed moves in multiple states to reduce children’s sugary drink consumption by making water, milk, and 100% juice the default choices with kids’ meals (although families can still order soda).  Click HERE to read a summary of state and local restaurant kids’ meal policies from the Center for Science in the Public Interest (CSPI). 

UK

More than 18 months have passed since the UK introduced its Soft Drinks Industry Levy (SDIL), and initial results are positive.

According to the levy, manufacturers are charged in two tiers: a lower rate of 18p per litre for beverages containing 5g sugar per 100ml or more; and a higher rate of 24p for those with 8g sugar or more.

The tax raised £153.8m ($197m, €174m) within its first seven months, from April to November 2018. During that same period, the vast majority of revenues – over 90% - came from manufacturers paying the higher rate of tax.

In July 2019, the UK government reported that the ‘hugely successful’ SDIL has removed the equivalent of 45,000 tonnes of sugar from soft drinks.

At the same time, under the leadership of then Prime Minister Theresa May, the government said the levy may be extended to milk drinks, which are currently excluded from the tax.

But the current Prime Minister Boris Johnson is not convinced. Just weeks before taking the head job, Johnson pledged to review ‘sin taxes’ such as the SDIL and its potential extension to sugar-sweetened milk beverages. Describing such levies as ‘nanny state’ style measures, Johnson said no new taxes would be introduced until a review is complete.

Isle of Man

Located in the Irish Sea off the coast of Great Britain, this self-governing crown dependency introduced the Soft Drinks Industry Levy in April 2019. The levy mirrors the SDIL in the UK.  

Businesses that purchase soft drinks from suppliers in the UK do not need to register for the levy as it will have already been imposed; but those that import soft drinks or produce them domestically have to register and pay the levy where applicable.

Ireland

Ireland’s Sugar Sweetened Drinks Tax (SSDT) came into effect on May 1, 2018: with two tiers as per the UK’s sugar tax (the levy kicks in for drinks with 5g sugar per 100ml while a higher rate is applied for those with 8g or more per 100ml). 

The levy covers flavored waters, carbonated drinks, energy and sports drinks and juice-based drinks.

In January 2019 the scope of the tax was extended to include certain plant protein drinks (such as soya, cereal, seed or nut-based drinks) and drinks containing milk fats if they don’t reach a calcium threshold.

For both categories, drinks with a calcium level less than 119 milligrams per 100ml are now included in the tax; while those with more calcium are exempt.

Italy

Italy is preparing to introduce a sugar levy in 2020, which will see manufacturers taxed 10 cents per litre of sugar-sweetened soft drinks.

Early reports stated the tax would be introduced in January 2020. This date was then pushed back until July the same year, and has since been postponed until 1 October 2020.

By delaying adoption from January to October, the government is expected to lose out on €175.3m ($195m) in potential revenue.

Poland

Poland is also planning a sugar tax, in an effort to address bad eating habits and encourage reformulation in sugar-sweetened products.

In an interview with Polish radio station Polskie Radio, deputy health minister Slawomir Gadomski said the levy would fall under the country’s National Cancer Plan.

“The sugar tax is an integral part of the strategy,” said Gadomski. “We would like to implement it by the end of 2022.”  

Malaysia

Malaysia implemented its sugar tax targeting sugar-sweetened beverages (SSBs) in July.

When the government announced the sugar tax back in November 2018, its primary objective was stated to be ‘to address the issue of nearly one out of two Malaysians being obese’.

“The duty proposed will be at RM0.40 per litre to be implemented on 1 April 2019 for non-alcoholic beverages containing added sugars of more than 5gm per 100ml drink; and for fruit or vegetable juice containing added sugars of more than 12gm per 100ml drink,”​ said Finance Minister Lim Guan Eng.

The tax implementation date was later postponed to July 1 2019, citing ‘more time for preparation’ as the reason.

Soft drink manufacturer F&N Malaysia initially reacted by announcing that it was looking at a possible price increase for 90% of its products, which it later retracted and said that it would be reformulating some 70% of its products instead.

Morocco

Morocco is still weighing-up a tax on beverages sweetened with sugar, after cancelling last year’s proposed tax due to pressure from manufacturers.

The country’s latest budget was presented by the Minister of Economy, Finance and Administration Reform in early November, where the internal consumption tax (ICT) was featured in article five of the 2020 finance bill.

A VAT of MAD 10 to 15 (US$1-1.55) per 100L will be taxed on sodas and non-carbonated drinks containing 10% fruit juice, as well as lemonade containing more than 6% lemon juice.

For beverages containing 5g of sugar or less per 100ml, the VAT would be MAD 30 (US$3) per 100L. For beverages containing 5 to 10g per 100ml, they would garner a tax of MAD 37.50 (US$3.88) per 100L. Drinks with sugar above 10g per 100mL would receive a tax of MAD 45 (US$4.66) per 100L.

According to Mostapha Brahimi, chairman of the sector committee in the House of Representatives, the Justice and Development Party (PJD) hopes to raise the rates to MAD 45, 50, and 55, respectively.

The plan is introduce ICTs on all sweet products over time, including dairy products such as yogurt and cream cheese.

UAE

The UAE Government is imposing a fresh 50% excise tax on a raft of products containing added sugar or sweeteners, with officials hoping it will reduce consumption of ‘unhealthy products’ and prevent chronic diseases.

The tax takes effect on January 1, 2020, and including any SSB (sugar sweetened beverage) product containing sugar or sweeteners, and is produced as either a ready-to-drink beverage or as concentrates, gels, powders, extracts, or any other form that can be converted into a SSB.

This is an extension to the list of excise taxable products after the first regulation in 2017, which imposed a 50% tax on carbonated drinks, and 100% tax on energy drinks.

However, certain beverages are excluded from the tax, even if they are categorised as SSB. This includes products containing 75% milk or milk substitutes, baby formula, baby food, beverages for special dietary needs and medical use.

Pakistan

The Pakistani government will double the country’s sugar tax to 17%, as well as implementing a raft of other levies, as revealed in the country’s recent Federal Budget 2019-20 announcement.

At present, sugar in the country is subject to an 8% sales tax, which led to a tax collection of some PKR18bn (US$115mn) for the incumbent Pakistan Tehreek-e-Insaf (PTI) government, but this is ‘lower than its actual potential’, said Pakistani State Minister of Revenue Hammad Azhar.

Presenting the budget at the National Assembly in June, Azhar said that: “To maximise this tax gap and to harmonise its rate with other items, it is proposed that the sales tax rate on sugar may be enhanced to 17%.”

According to Geo.tv, estimates based on this measure are that sugar prices will increase by some PKR3.60 (US$0.023) per kilogramme.

Oman

Oman joined other GCC states, including Saudi Arabia, the UAE, and Qatar, in implementing a selective tax on energy drinks, soft drinks, alcoholic beverages and tobacco in June.

The tax rate for tobacco, pork, alcoholic beverages and energy drinks was set at 100%, while that of soft drinks is 50%, according to an announcement by Oman’s Secretariat General for Taxation (SGT).

The tax, which was implemented on June 15, is applicable to both local manufacturers and importing companies.

“The registration is subject to selective taxes on importers and producers of selective goods, and all those who put these goods for consumption, and anyone who owns them in possession of it, and authorised by the Secretariat General for Taxation to establish a tax warehouse,” the SGT said in a statement.

Panama

Last month (18 November), Panama’s National Assembly voted through a national health program that included a tax on sugar-sweetened beverages.

The law increased the tax on soft drinks from 5% to 7%. It also sets a 5% tax on the rest of domestic or imported sugary drinks and increases the tax from 6% to 10% on syrups and concentrates used to produce sugary drinks.

However, there are several exceptions: dairy-, grain- and cereal-based beverages, natural fruit juices and concentrates, or products with less than 7.5 grams of sugar per 100 ml are exempt from the tax.

The law also gives the beverage industry 90 working days from when the law was passed to include nutritional content on all national and imported product labels in Spanish.

In Panama, 62% of adults are overweight, and one in four are obese. In young children, overweight affects one in 10, and at least four in 10 schoolchildren are overweight, according to data from the ministries of health and education and the United Nations’ Food and Agriculture Organization (FAO).

Peru

In May last year, Peru’s Ministry of Economy and Finance raised the Selective Consumption Tax (ISC) from 17 to 25% on sugar-sweetened beverages with a sugar content of 6g or more per 100ml.

Non-alcoholic beer with a total sugar content equal to or greater than 6g per 100ml also saw a 25% tax added.

Alcoholic beverages and beer with a sugar content below this threshold, however, kept the original tax rate of 17%.

Although met with opposition from manufacturers, Peruvian consumer association ASPEC welcomed the tax increase, saying it was aimed at improving the country’s health by tackling “silent diseases” such as obesity, cancer and cardiovascular disease.

According to 2016 figures from the national statistics institute, 35% of the Peruvian population aged 15 or more are overweight while 17.8% of the population is obese. Obesity affects women more than men in Peru (22.4% compared to 13.3%).

Barbados

Barbados brought in a 10% ad valorem tax on sugar-sweetened beverages (SSBs) in June 2015. Value-based (ad valorem) taxes add a percentage of the product's value to its price.

Bottled waters, 100% juices, coconut water, unsweetened milk, and powdered drinks are exempt.

The levy applies to carbonated soft drinks, juice drinks, sports drinks and fruit juices and, according to studies conducted after the introduction has resulted in a price increase of 5.9%.  

However, a recent study published this year, which looked at point-of-sale data from a supermarket that were then stratified according to price, found evidence to suggest consumers may have reacted to the price increase by purchasing cheaper sugary drinks as well as substituting to untaxed products, such as bottled water.

“A policy that encourages consumers to substitute towards cheaper SSBs may lead to an increase in sugar consumption in cases where cheaper SSBs are associated with higher levels of sugar,” the researchers wrote.

The Caribbean island has an adult obesity prevalence of around 34%, according to a national survey.

Mexico

In 2014, Mexico introduced a 10% tax on all sugar-sweetened beverages, including fruit drinks and sweetened iced tea, to tackle its obesity crisis, which had reached levels prompting the government to declare a national epidemic.

Although set at a relatively low rate, the Ministry of Health said it had reduced sweetened beverage sales by 12% in its first year.

In 2017, scientists from Mexico’s Instituto Nacional de Salud Pública and the US University of North Carolina at Chapel Hill calculated a 9.7% decline in the second year.

According to the National Association of Producers of Refreshments and Carbonated Water (ANPRAC), however, the regressive sugar tax has hit Mexico's poorest the hardest, increasing inequality in the country.

“After five years, we have seen that the tax on soft drinks affects the poorest Mexicans and is increasing total inequality,” said Tania Ramos, information and analytics manager at ANPRAC. “Around 60% of all that is collected by the Ministry is from the poorest.”

Bermuda

The British Overseas Territory introduced a sugar tax in October 2018 as the start of a phased levy. What makes it different to many other sugar taxes is that it goes beyond drinks.

The tax started by imposing a 50% duty on sugary drinks as well as candies, pure sugar and dilutables (such as syrups). 100% fruit juice and diet drinks were not included. In April 2019, the duty increased to 75%, and the tax was widened to chocolate and cocoa preparations containing added sugar.

The revenue from the tax is being used to promote healthy living initiatives.

South Africa

South Africa introduced a Health Promotion Levy on sugary beverages in April 2018. Drinks with more than 4g sugar per 100ml are taxed with a fixed rate per gram of sugar (for each gram over the 4g threshold).

A study published in Social Science & Medicine in October 2019 found ‘significant price increases’ for carbonates (1.006 ZAR per litre / $0.07 / €0.06 ) after the tax’s introduction; while the price of untaxed beverages did not change. It also found that price increases were similar for lower sugar and higher sugar taxed beverages within the tax range.

“This suggests that although the HPL [Health Promotion Levy] increased the relative price between carbonates and un-taxed products, the HPL was not effective in increasing the relative price between higher sugar and lower sugar varieties within the carbonate segment,” write the authors.

“While the HPL may incentivize substitution from high sugar carbonates to bottled water (or other untaxed products), it has not created an incentive to substitute to low sugar or diet carbonates.”

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