soft drinks tax image final

Why a soft drinks tax is not the answer

As the nation’s collective waistline continues to expand, through the media there are various calls for a tax on certain products, including soft drinks, as a means to curb obesity.  Whilst theoretical modelling might point to taxes as a solution, in reality these punitive measures are ineffective, inefficient and unfair for a range of reasons.

Added sugar consumption declining...

Australia’s consumption of added sugar is declining. A recent study identified that the prevalence of obesity has increased 3 fold in Australians since 1980 while per capita consumption of refined sugar (sucrose) decreased by 23% from 1980 to 2003¹. The research also found that when all sources of nutritive sweeteners, including high fructose corn syrups, were considered, per capita consumption decreased in Australia by 16%. This was coupled with a reduction in sales of nutritively (sugar) sweetened beverages by 64 million litres from 2002 to 2006 and a reduction in percentage of children consuming sugar-sweetened beverages between 1995 and 2007. The findings confirm an “Australian Paradox”—a substantial decline in refined sugars intake over the same timeframe that obesity has increased. The implication is that efforts to reduce sugar intake may reduce consumption but may not reduce the prevalence of obesity.

Another study found that overall sugar contribution from water-based beverages has declined considerably². Over the last 15 years, there has been a 17% decrease per person sugar contribution from all water-based beverages, and a 26% decrease per person sugar contribution from carbonated soft drinks.

¹Barclay AW, Brand Miller J, The Australian Paradox: A Substantial Decline in Sugars Intake over the SameTimeframe that Overweight and Obesity has Increased, Nutrients 2011, 3, 491- 504
²Levy, G., Tapsell, L. — Shifts in purchasing patterns of non-alcoholic, water-based beverages in Australia, 1997-2006. Nutrition and Dietetics 2007; 64: 268-279

Soft drinks small part of diet....

In the concept of the total diet, soft drinks represent a relatively small portion of dietary kilojoules. A recent secondary analysis of the 2011-12 Australian Health Survey conducted by the CSIRO shows that across the population, soft drinks contributed just 1.7% of the average adult’s daily energy intake, and just 1.9% of the average child’s daily energy intake¹. Within the discretionary food (treat) category, soft drinks ranked 7th in daily energy contribution both in adults and children, at just 4% energy contribution. In adults for example, soft drinks (4%) were ranked behind confectionery/ chocolate (18%), sweet biscuits (13%), alcoholic beverages (13%), burgers/pizzas/tacos (7%), pastries (6%) and fried potatoes/crisps (5%). For children, soft drinks (4%) were behind confectionery/ chocolate (17%), sweet biscuits (16%), fried potatoes/crisps (11%), burgers/pizzas/tacos (10%), savoury biscuits (6%) and pastries (5%).

¹Hendrie, G.A., Baird, D., Syrette, J., Barnes, M., Riley, M (2015) Consumption of fruit juice in the Australian population: A secondary analysis of the Australian National Nutrition and Physical Activity Survey 2011-12. CSIRO, Australia.

Similar taxes in other countries have failed…

Often, proponents of such taxes cite the success of such schemes in other countries. Unfortunately, similar taxes have not been a success, but have failed.

In 2012, the Danish ‘fat tax’ was repealed 18 months after it was introduced, and further discriminatory taxes that the Government had planned to introduce were scrapped altogether. The negative impact on jobs, inflation and administrative costs on businesses, as well as the distinct lack of an impact on consumption patterns, dietary habits and therefore overweight and obesity were the main reasons for rescinding the tax.

In 2013 the European Commission addressed the issue of overweight and obesity by conducting a study on the effectiveness of taxes on foods and beverages imposed in four EU states – Finland, France, Netherlands and Hungary¹.

The purpose of these taxes on foods considered high in fat, sugar and salt was to improve public health. However, the EC study published in June 2014 found that the taxes have led instead to:

  • Increased administrative costs
  • Reduced jobs in some cases
  • Higher food prices
  • No discernible improvement to public health

This study makes clear that no solid evidence was found that the discriminatory excise taxes improved public health. This study also found that the taxes are implicated in increased costs, job losses and declining profits to businesses.

In 2014, a soft drinks tax was introduced in Mexico. Whilst it is still too early to determine the full, long term impact of this tax on obesity levels in the country, what is apparent is that since it was introduced, the tax is hitting the poorest people the hardest and having negligible impact on calorie intake. It is estimated that in Mexico, the source of calories coming from soft drinks had initially reduced by 6.2 calories when the tax was first introduced. In the concept of an average daily dietary intake of 3,025 calories, this reduction represents just 0.20% of the daily diet, or equivalent to ¼ of a teaspoon of sugar.

¹European Consortium for Sustainable Industrial Policy

Unintended consequences…

One key concern of any potential tax on products like soft drinks is the potential for unintended consequences on households in low socio-economic areas. In Mexico for example, research has shown that 63.7% of the tax is collected from low-SES households and of these, households living in poverty paid 37.5% of the total tax collected¹. Families faced with a price increase in one product, like soft drinks, could potentially reallocate aspects of the grocery spend to accommodate the rise at the expense of other items such as fresh fruit and vegetables. Such taxes are regressive and impact most on the people who can least afford it.

¹KANTAR World Panel January – December 2011

Will not change behaviour....

The implied rationale behind introducing a tax such as those on tobacco or fuel is ostensibly to reduce consumption. However, evidence on food and drink taxes suggests consumers may not behave as public health advocates would wish¹.

One report on the Danish experience found 90 per cent of Danes were consuming the same amount of targeted fatty foods of butter, cream and cheese a year after the introduction of the tax².

¹Powell, LM and Chaloupka, F.J. “Food prices and obesity: evidence and policy implications for taxes and subsidies” Milbank Q 2009; 87: pages 229-257
²“Fat Tax has little effect” Politiken November 23, 2011 retrieved from on 6 July 2015

Consumers shifting to 'diet' beverages...

A walk down the supermarket aisle or a visit to the convenience store drinks’ fridge clearly shows the large number of low and no kilojoule beverage options available for consumers. In fact today, three of the four most popular soft drinks are low/no kilojoule¹. As part of the whole supermarket offering, beverages are unique as a category where consumers can choose from a regular kilojoule or a low/no kilojoule alternative. These ‘diet’ options that are now available have been driven by consumer demand, as beverage manufacturers respond to changing taste, hydration and kilojoule needs of Australians.

A recent study of sales trends of water-based beverages over a 15 year period showed a clear shift away from regular kilojoule beverages to low/no kilojoule alternatives². In 1997, regular kilojoule beverages comprised 70% of sales of water-based beverages with low/no kilojoules alternatives comprising 30%. In 2011, this had shifted to 52% regular kilojoule and 42% low/no kilojoule. This trend shows consumers are choosing more lower kilojoule options to suit their lifestyle.

¹Industry data
²Levy, G., Tapsell, L. — Shifts in purchasing patterns of non-alcoholic, water-based beverages in Australia, 1997-2006. Nutrition and Dietetics 2007; 64: 268-279

Education not taxation...

A 2014 national poll of 2,136 Australians found that unequivocally, people saw education programs about a healthy diet and physical activity as both the most effective way to address overweight and obesity, and the most supported.10 On a scale of nine options to address the problem, respondents ranked nutritional information on labels (2nd) and vending machines (3rd) as the next most effective and supported options. Those measures to address overweight and obesity viewed as the least effective and least supported were a tax on soft drinks (8th out of 9) and restrictions by Government on where parents can give their children soft drinks (9th out 9).


What action has the industry taken in addressing obesity?

  • not marketed regular kilojoule products to children under 12
  • reformulated products to offer low and no-sugar varieties
  • voluntarily dispayed kilojoule information on the front of labels
  • has restricted sales of regular kilojoules soft drinks in schools
Print Friendly