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Soda Tax

Taxing sugary drinks unlikely to cut Newfoundland and Labrador obesity rates

Newfoundland is creeping toward a fiscal cliff.

The province’s debt load is more than $12 billion, which is approximately $23,000 per resident. COVID-19 has obviously worsened that troubling trend, with this year’s budget deficit expected to reach $826 million.

Just this week legislators proposed a handful of tax hikes to help cover the gap, ranging from increasing personal income tax rates for the wealthier brackets, increasing taxes on cigarettes, and the outright silly concept of a “Pepsi tax.”

In one year’s time, the province will implement a tax on sugary drinks at a rate of 20 cents per litre, generating an estimated almost $9 million per year in revenue.

Finance Minister Siobhan Coady justified the tax, beyond the need for revenue, stating that the tax will “position Newfoundland and Labrador as a leader in Canada and will help avoid future demands on the health-care system.”

When described like that, a Pepsi tax sounds harmonious. Who doesn’t want to curb obesity and generate revenue?

Unfortunately for supporters of the tax, the evidence isn’t really there.

In one year’s time, the province will implement a tax on sugary drinks at a rate of 20 cents per litre, generating an estimated nearly $9 million per year in revenue.

Unfortunately for supporters of the tax, the evidence isn’t really there. In one year’s time, the province will implement a tax on sugary drinks at a rate of 20 cents per litre, generating an estimated nearly $9 million per year in revenue.

Regressive taxes

Consumption taxes like this are often highly regressive, meaning that low-income residents bear most of the burden, and are ultimately ineffective in achieving their public health goals.

Looking to Mexico provides a good case study on the efficacy of soft drink taxes. With one of the highest obesity rates in the world, Mexico enacted a soft drink tax, increasing prices by nearly 13 per cent, with the goal of reducing caloric intake. A time-series analysis of the impact of the tax showed that it reduced consumption of these drinks by only 3.8 per cent, which represents less than seven calories per day. Estimates from Canada also show the same. When PEI’s Green Party proposed a soft drink tax of 20 per cent per litre it was only estimated to reduce caloric intake from soft drinks by two per cent, which is approximately 2.5 calories per day.

While these taxes do in fact reduce consumption to some degree, the reductions are so small that they have virtually no impact on obesity rates. To make matters worse, taxes like this aren’t just ineffective in combating obesity, they are heavily regressive. Looking again at the data from Mexico, the tax they implemented was largely paid for by those with a low socioeconomic status.

In fact, a majority of the revenue, upwards of 63 per cent, was generated from families at, or below, the poverty line. If we take the province’s estimation of $9 million a year in revenue, it is reasonable to assume that $5.67 million of that revenue will be coming from the pockets of low-income Newfoundlanders.

In other jurisdictions south of the border, like Cook County Illinois, no soda tax has avoided the uncomfortable reality of being incredibly regressive, which is partly why they eventually abandoned the tax altogether.

Doubtful benefits

Newfoundlanders need to ask themselves, is it worth implementing a heavily regressive tax on low-income families to move the needle on obesity by a few calories a day? I’d argue that the negatives of the tax far outweigh the benefits, and that’s before business impacts enter the equation. This also happens to be the same conclusion found in New Zealand.

The New Zealand Institute of Economic Research, in a report to the Ministry of Health, stated that “We have yet to see any clear evidence that imposing a sugar tax would meet a comprehensive cost-benefit test.”

While both budget shortfalls and obesity are serious problems, a “Pepsi tax” isn’t a serious solution.

Originally published here.

A liberal solution to Britain’s obesity crisis

Once an ardent opponent of sin taxes, Boris Johnson has now experienced a mighty change of heart. We don’t yet know what his new strategy will look like but one thing is clear: more nannying won’t solve Britain’s obesity problem.

In April 2018, as part of the government’s childhood obesity strategy, the UK government introduced a sugar tax to reduce sugar consumption. A year later, it was announced that plain packaging of crisps, sweets and fizzy drinks was also on the agenda.

In light of the coronavirus pandemic and excessive weight having been recognised as a risk factor, the discussion around obesity and ways to tackle it has been spurred into motion again. The lockdown made things even worse. Almost half of Brits – 47 per cent – have put on weight since lockdown began in March.

The UK government has been using various types of interventions to solve the rising national rates of obesity, and more of those are seemingly on the way. However, a substantial societal shift can only be achieved through a partnership between government and other actors such as business, civil society organisations and advocacy groups and education systems.

Challenging times require innovative solutions. In order to drive down obesity, we have to review our incentives. Longevity and a healthy lifestyle is an excellent motivation in itself but monetary incentives might turn out to be more successful.

Obesity is a societal issue, so fighting it requires a multi-faceted approach. Nowadays, companies go out of their way to improve the wellbeing of their employees by providing gyms, yoga classes, company-wide fitness programs and so on.

Many American firms are now incentivising their employees to become healthier in order to reduce overall insurance costs for those in pooled insurance programs. In the UK, if companies were given tax relief when its provisions allow obesity rates among its employees to decrease, it is likely they would take up the burden to solve this social and public health issue themselves.

The results could be astounding provided that transparency is guaranteed. In a similar fashion, the government could cooperate with the IT sector to create an app where citizens could track their lifestyle, earn rewards for eating healthy food and exercising more in the form of income tax reduction upon reaching specific milestones.

One example of such an idea is the Sweatcoin app which converts steps into a currency that can be spent on various goods and services. The UK could succeed in solving one of the world’s most pressing issues if it decides to embrace innovation.

Lastly, we should also focus on educating students about sugar consumption, and generally about health to ensure they are able to make informed and responsible consumer decisions.

Daily calorie intake in the UK is also decreasing with each decade. It is exercise that many people are lacking, and we should educate consumers about this fact. In particular, education should draw the attention of consumers to sugar so that consumers don’t make these consumption choices by inertia but take time to balance out the present and future costs and benefits.

Coronavirus has spurred a great deal of fear, especially around our health and wellbeing. It is, however, key to remember that that government interventionism is expensive, short-sighted and ignores the complexity of the consumer decision-making process. Education and innovation are a smarter way forward.

Originally published here.


The Consumer Choice Center is the consumer advocacy group supporting lifestyle freedom, innovation, privacy, science, and consumer choice. The main policy areas we focus on are digital, mobility, lifestyle & consumer goods, and health & science.

The CCC represents consumers in over 100 countries across the globe. We closely monitor regulatory trends in Ottawa, Washington, Brussels, Geneva and other hotspots of regulation and inform and activate consumers to fight for #ConsumerChoice. Learn more at consumerchoicecenter.org

A soda tax is a bad idea, and we can prove it

Opinion: A sugary drink tax shouldn’t be dismissed just because it fails to achieve its goals. It is also heavily regressive.

By David Clement

Canada has an obesity problem, both for adults, and for children. When you look at the numbers, they immediately jump off the page. Since 1978, the obesity rate for Canadians has more than doubled. In 1978, the number of adults who were considered obese was 14 per cent. In 2014, that figure was 28 per cent. General forecasts on this trend state that the number of adults who are obese could rise to 34 per cent by 2025. Rates of obesity this high create a myriad of negative health outcomes, and cost the health-care system billions of dollars annually.

There have been a variety of policies proposed to help curb obesity. Most recently was the call for a national soft drink tax by Liberal MP Julie Dabrusin. Specifically, Dabrusin is calling for a 20-per-cent tax on sugar-sweetened beverages. The thought process here is simple: if you excessively tax a product, it will end up discouraging the purchase of that product, which will lead to better health outcomes and lower expenditures on obesity-related illnesses. The problem with this new tax proposal is that these sin taxes almost always fail to achieve their desired outcome, and have the negative externality of being heavily regressive against the poor.

Sin taxes almost always fail to achieve their desired outcome 

Dabrusin’s goal of healthier outcomes is a noble one, but excessively taxing sugary drinks isn’t a serious solution. We know from other jurisdictions that additional taxes on sugary drinks rarely achieve their goal of reducing caloric intake in any meaningful way. For example, Mexico, a country with an obesity rate near 70 per cent, enacted a sugary drink tax with the goal of reducing caloric intake, thus producing better health outcomes. An analysis of the impact of the tax showed that it reduced consumption of these drinks by only 3.8 per cent, which represents less than seven calories per day. A reduction of this size can hardly be considered a success.

Domestically, we have seen several proposals for sugary drink taxes. In the past provincial election in New Brunswick, Green Party Leader David Coon proposed that the province enact a sugary drink tax of 20 cents per litre. The proposed tax would have added taxes on all pop, most juices, all carbonated water, all non-carbonated flavoured water, most teas, drinkable yogurts and flavoured milk. The major issue with this provincial version of what Dabrusin is proposing is that the designers of the tax scheme openly admitted that it was unlikely to make any significant impact on caloric intake. According to the Green Party’s own submission, the 20-per-cent tax was at best going to reduce overall sugary drink intake by two per cent a year.

In the past provincial election in New Brunswick, the Green Party proposed a sugary drink tax of 20 cents per litre. Getty Images/iStockphoto

At the most, the New Brunswick tax would reduce caloric intake for the average resident by a measly 2.5 calories per day. This estimate was created by using full-calorie soft drinks as a reference point, meaning that the total caloric reduction could actually be much less than 2.5 calories per day given that consumers often consume other sugar-sweetened beverages with fewer total calories than full-calorie soft drinks. It is safe to say that reducing caloric intake by, at most, 2.5 calories per day would have no significant impact on public health. We don’t yet have Dabrusin’s projections on caloric-intake reductions, but from what we can see at the provincial level, the impact wouldn’t be significant in any way.

A sugary drink tax shouldn’t just be dismissed because it fails to achieve its goals. It should also be dismissed because it is heavily regressive. Mexico, again as an example, shows that taxes like the one proposed have a devastating impact on low-income families. The majority of the tax revenue generated from the Mexican tax came from low-income families. Specifically, 61.3 per cent of the revenue generated came from households with low socioeconomic status. Thus, the funds raised were derived from the most vulnerable in society. Supporters of Dabrusin’s proposed tax have cited that the revenue generated would be around $1.2 billion per year. If the Mexican regressive trend holds true for Canada, which can be assumed because it was apparent in cities like Philadelphia, then $732 million of that $1.2 billion will come directly from low-income Canadians. This is an uncomfortable fact that supporters of the tax have yet to sufficiently address.

$732 million of that $1.2 billion will come directly from low-income Canadians 

Soft-drink taxes are simply bad policies being used to combat a real problem. These taxes almost always miss their mark, and disproportionately impact low-income consumers. These truths are part of the reason Cook County, Ill. (which includes Chicago) repealed its soft-drink tax. Because of these fairly consistent trends, the New Zealand Institute of Economic Research, in a report to the Ministry of Health, stated that “We have yet to see any clear evidence that imposing a sugar tax would meet a comprehensive cost-benefit test.” It’s clear that obesity is a problem in Canada, but it is also clear that soft-drink taxes don’t pass the cost-benefit test, and shouldn’t be considered as a serious solution.

— David Clement is the North American Affairs Manager for the Consumer Choice Center.

Read more here

A ban on local grocery taxes helps Washington consumers

On Election Day in 2018, Washington voters passed an ordinance to curb local governments’ efforts to pass additional taxes on grocery items, including meats, beverages, produce, dairy, grains, and more. The 55-45 percent vote was no doubt a win for the consumers, but so far reaction to the local tax ban has been negative. Why? […]

Minority leaders in Philadelphia speak up against the soda tax

As the Consumer Choice Center has been keen to point out in several articles and campaigns, additional taxes and levies on sugary drinks end up being regressive and hurting the very people they aim to help: minorities and the poor. Now, minority leaders in Philadelphia, seeing the toll the taxes have had in their communities, […]

En finir avec l’État-nounou

LES ECHOS: Comme le montre la taxe sur les sodas, certains Etats conduisent des politiques «bienveillantes» à l’égard des consommateurs. Il s’agit en réalité de mesures condescendantes et paternalistes.

Taxe sodas: le retour de l’Etat nounou

LE FIGARO: Les députés viennent d’augmenter la taxe sur les sodas. Bill Wirtz invite la France à choisir la voie de la liberté plutôt que celle du contrôle tatillon des individus.

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