Sugar Taxes | tutor2u Economics
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Sugar Taxes

  • Levels: AS, A Level, IB
  • Exam boards: AQA, Edexcel, OCR, IB, Eduqas, WJEC

Is the UK tax on high sugar drinks an effective and equitable government intervention to help address the growing social costs arising from our consumption of high sugar drinks?

Economics of a Sugar Tax

Intervention in the form of a sugar tax is closely linked to the epidemic of obesity in the UK and other countries along with the costs of the health problems it creates.

Public Health (England) 2015 Report
“Consuming too much sugar and too many foods and drinks high in sugar can lead to weight gain, which in turn increases the risk of heart disease, type 2 diabetes, stroke and some cancers. It is also linked to tooth decay. In 2012, almost 25% of adults in England were obese and a further 37% were overweight. In children, the situation is particularly worrying with almost 10% of 4 to 5 year olds and 19% of 10 to 11 year olds being obese.”

Soft Drinks Industry Levy (2018) 

The sugar tax, known as the Soft Drinks Industry Levy (SDIL), begins from April 2018 and consists of two bands

  • Soft drinks containing more than five grams of sugar per 100ml
  • A higher tax band for drinks containing more than eight grams of sugar per 100ml. 

The tax rates are:

  • 18p per litre if the drink has 5g of sugar or more per 100ml
  • 24p per litre if the drink has 8g of sugar or more per 100ml

Beverages that are exempt include bottled water, pure fruit juices, milk, milkshakes and yoghurt drinks – even though many contain sugars.

A sugar tax is a mechanism to influence consumer behaviour at the point of purchase. 

Is a tax a nudge? Not according to the Behavioural Insights team – “changing people’s economic incentives by imposing a tax is not a ‘nudge’ in the classic definition.”

Revenue from the sugar tax - OBR now estimate that the levy will raise around £380 million a year from 2018.  A tax that is effective in changing consumption behaviour will lower the expected revenues!

Overall a tax can have signalling effects that drinking high sugar products is bad for your health and may start to prompt some attitudinal changes

Soft Drinks Industry Levy (2018)

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