Sugar (Soda) Taxes (Government Intervention)
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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.
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)
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