Live revision! Join us for our free exam revision livestreams Watch now

Study Notes

Sugar (Soda) Taxes (Government Intervention)

AS, A-Level, IB
AQA, Edexcel, OCR, IB, Eduqas, WJEC

Last updated 8 Jan 2020

In 2018, the UK government introduced a tax on high-sugar drinks and some campaigners are lobbying for this indirect tax to be extended to other foods including snacks and cereals that have a high sugar content.

Is this an effective and equitable form of government intervention in a market to achieve desired changes in consumer behaviour? This study note brings together some useful resources on the issue. We have a collection of curated articles and study notes on the economics of a sugar tax available from this link.

Economics of a Sugar Tax (Market Failure & Government Intervention) - revision video

Arguments in favour of a sugar tax:

  • External costs of sugary drinks – externalities are a cause of market failure
  • Information failures – people often under-estimate the long term costs to their own healthcare of eating high sugar foods and drinks
  • Sugar tax raises revenue – this might be ring-fenced for other projects such as increased funding for school and community sports facilities
  • Tax encourages producers to re-formulate drinks - i.e. make them healthier by reducing the sugar content. There is substantial evidence that this has happened with high sugar drinks.

Independent: 20% snack tax could have huge impact on UK obesity (2019)

BBC: Efforts to cut sugar out of food way off target

Sugary Drinks Kill 24,000 Mexicans Every Year

Points against the introduction of a sugar tax

  • Might be regressive on lower income families i.e. they face a higher burden from the tax
  • Other policies might be more effective in cutting consumption in the long run
  • People might simply switch to other sugary products
  • Risk of lost jobs in pubs and shops that rely heavily on drink and confectionery sales
Share of action retailers and food companies should take to inform public of how much sugar is in food and drinks in the United Kingdom in 2016
Percentage change in average base price per litre of soft drinks after the sugar tax is applied in the United Kingdom (UK) in 2016, by brand
Dr Juan Rivera discusses the challenges and benefits of the sugar tax in Mexico
How Philadelphia's Soda Tax Is Impacting The City
Do Soda Taxes Create Healthier Communities?

© 2002-2024 Tutor2u Limited. Company Reg no: 04489574. VAT reg no 816865400.