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Suladda PonguttaNovember 2, 2009

Why should we tax sugar-sweetened

beverages?

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Outline

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•Why Sugar-sweetened beverages (SSB) should be tax?

•Tax levy

•Proposed tax policies and projected effects

•Objections, industry reaction and public support

•Conclusions

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Why Sugar-sweetened Why Sugar-sweetened beverages beverages

should be tax?should be tax?

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Consumption Trends

USA

Thailand

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• Obesity; consumers yield energy with poor satiating properties.

• Type 2 diabetes;- ruin pancreatic islet cells - causing insulin resistance

• Cardiovascular diseases; - increase triglyceride level- increase blood pressure - lower high-density lipoprotein level

Health Outcomes

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Economic problem

Market Failures• The phenomenon of less-than-optimal production and

consumption caused by poor decision-making process.• is often used as a justification for government

intervention.

Market failures of sugar-sweetened beverages1. Health consequences are not perceived & concerned +

Health education lose to marketing campaigns.2. Lack of individual’s awareness of long term harms.3. There are externalities that consumers do not realize

e.g. cost resulted from obesity and chronic diseases

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Tax levy&

Proposed tax policies &

Projected effects

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Tax levy

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Levy Advantage Disadvantage1. Specific

excise taxo levied on

unitso should keep

pace with inflation

o more effect on consumption

o more stable revenues (less dependent on industry pricing)

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2. Ad valorem excise tax

o % of priceo there should

be incentives to reduce sugar/ounce.

o automatically index the inflation

o encourage the purchase of lower-priced brands or large containers

o prices exclude tax (lower price before taxing might urge more purchase)

o fountain drinks are untaxed

Effectiveness depends on type of tax and tax rate

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Proposed Tax Policies and Projected Effects

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Options Projected effectives1. 1 Cent/ounce of

caloric sweetener(= 2.4x of current

rate)

1. The cost of a 20-oz SSB increases by 15 to 20%

2. Consumptions of SSB decrease 12-16%. (elasticity; -0.8 to 1.0%)

3. Calories derived from SSB decrease 10% or 20 kcal/person/day

4. At the first year, tax would raise $14.9 billion

1. Tax beverages containing caloric sweeteners or calories exceed a threshold (1 g of sugar/ounce or calories/ounce)

1. The consumption below the threshold provides 174 fewer calories/person/day

2. Promote calorie reductions3. Encourage manufacturers to

reformulate productsMore suitable for specific excise tax

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Objections&

Industry reaction&

Public support

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ndObjections

1. Taxing sugar-sweetened beverages would be regressive

Argument for the objection The burden to the poor and youth (price and

effects to health) Decrease consumption among the poor and

youth due to their sensitive to price changes Prevent brand loyalties since young age Soft drinks are not necessary for survival Revenues for programs promoting health

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ndObjections

2. Taxing soft drinks will not solve the obesity crisis and is blunt instrument that affects even those who consume small amounts of such beverages.

Arguments for the objection The important is to implement multi-

intervention. Reducing 1-2% would have mark impact on health.

Decrease financial burden.

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Industry reaction

• PepsiCo threatened to move its corporate headquarters.

• Tobacco industry created front groups with names that suggested community involvement.

• Beverage industry created “Americans Against Food Taxes”.

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Public Support

• Rose continually from 33% in 2001 to 54% in 2004.

• Support was highest when the revenue was earmarked for programs promoting childhood nutrition or obesity prevention.

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ndConclusions

• Tax and price control should be implemented along with other interventions regarding to achieve the goal.

- to decrease the consumption of SSB- to be the source of fund supporting health promotion program

• The great challenges of SSB taxing- SSB itself is non toxic.- Tax SSB alone has little or no effect on improving health.- Where is the most appropriate point of

taxing?

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Thank You

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