United Nations Calls for a 20% Soft Drinks & Juice Tax

by on 12 October, 2016

The United Nations Health Agency has recently called on all countries to implement of “at least 20%” on sugar sweetened beverages to curb the epidemic of global obesity. This is a sensible suggestion at first glance, but this exact tax has been tried in many countries and has had no or minimal effect on obesity. This is a public policy suggestion based in intentions and not actual results, leading to many unintended consequences.

The tax is meant to increase the price of sugar sweetened beverages which leads to a decrease in consumption and improved health outcomes of people. But this tax has led to a minimal reduction in energy consumption with the Rural Health Minister, Fiona Nash calling this tax “a lazy solution to a complex problem.”

Firstly, the tax gets partly absorbed by the business’ and partly by the consumer. Secondly, consumers instead of reducing energy consumption, have moved to inferior goods which are more affordable, along with substituting energy in other areas like food. People are inelastic with their energy consumption which means it’s hard to tax people into health, without causing many other problems. This was exemplified with the Danish fat tax which saw 90% of people not change their dietary habits. And also New Zealand where sugar consumption decreased 11% for males while obesity soared 63%.

This tax has the potential of threatening many sugar industry jobs and incur huge economic costs for minor health benefits. For every $1 of health savings from the sugar tax in the UK, taxpayers’ pay about $65. The indirect health outcomes are minuscule compared to the tax paid.

This tax, like any other consumption tax, is regressive, and affects the poorest people the most. This is especially bad since the poorest people are the least elastic group with their food consumption.

This is an irresponsible band aid solution from the UN which will cause more harm than good.

Cody Findlay is an intern at The Australian Taxpayers’ Alliance

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