Sugar tax to curb soft drink consumption? Here's how it works in some countries

PM Lee, who devoted a significant chunk of his National Day Rally speech on Sunday (Aug 20) to advocating a healthier lifestyle, also cited examples of how other countries around the world deal with obesity.
PM Lee, who devoted a significant chunk of his National Day Rally speech on Sunday (Aug 20) to advocating a healthier lifestyle, also cited examples of how other countries around the world deal with obesity.PHOTO: AFP

SINGAPORE - Soft drink manufacturers here have agreed to cut down on the sugar in their drinks, in what Prime Minister Lee Hsien Loong said is the first step towards tackling Singapore's diabetes problem.

PM Lee, who devoted a significant chunk of his National Day Rally speech on Sunday (Aug 20) to advocating a healthier lifestyle, also cited examples of how other countries around the world deal with obesity.

These include imposing a sugar tax and placing warning labels on drinks with high sugar content. However, he pointed out that it is not clear if such measures have proven to be effective.

The World Health Organisation has been vocal in its support for a sugary drink tax, having publicly urged all countries last year to consider one so as to curb soaring obesity rates, especially in children.

It claimed that a tax of 20 per cent or more will result in a drop in sales and consumption of sugary drinks.

BeverageDaily.com, an online website specialising in news on the world's beverage industry, called 2016 the year of the sugar tax as more countries jumped on the bandwagon.

 

Here is a look at how some countries have fared since implementing the tax.

Mexico

A country famous for its love for Coca-Cola is just as well known for its obesity problem - over 70 per cent of its population is overweight.

Mexican President Enrique Peña Nieto first proposed a 10 per cent tax on all soft drinks in September 2013, which was met with strong opposition from soft drink companies. They argued that it would lead to a loss of jobs without effectively addressing the problem.

A tax of 1 Mexican peso (S$0.08) per litre was eventually passed by the senate the following month.

A study by academics in Mexico and the US found that the tax had a significant impact - in the first year after it was introduced, purchases of sugary drinks declined by 5.5 per cent. This was followed by a 9.7 per cent drop in the second year.

The effect on overall health, however, has yet to be calculated, while critics say the amount taxed is too low and that it is only the poorest households which are affected.

 
 

Denmark

Denmark's unpopular soft drink tax, which had been in place since the 1930s, was first reduced by half in July 2013 before being fully abolished the following year.

Danes used to be taxed 1.64 Danish krone (S$0.35) per litre of soft drink.

But while the tax helped the Government earn some 450 million krone in annual revenue, it also led to a yearly loss of about 290 million krone to illegal soft drink sales and its people visiting neighbouring countries like Sweden and Germany to buy cheaper soda.

In repealing the tax, the Government acknowledged its "regressive nature" and negative impact on jobs, which were lost to cross-border trade.

Brunei

Brunei's sugary drink tax, which took effect from April this year, imposes a fee of 4 Brunei dollars (S$4) per 10 litres for drinks with a sugar content of 6g (or more) per 100ml.

This means that a can of soft drink costs roughly 13 cents more.

Dr Justin Wong Yun Yaw, medical superintendent of public health at Brunei's Ministry of Health, said he hoped the tax will spur more people to drink water and unsweetened products.

He noted that nearly half the children in Brunei consume one or more soft drinks a day. About six in 10 Bruneian adults are said to be overweight.

Dr Wong was quoted by the Borneo Bulletin as saying that people are "fairly supportive" of the tax and that beverage firms understand the need for a reformulation of their products.

Hungary

The country's public health product tax, introduced in September 2011, imposes a levy not only on sugary drinks, but also energy drinks, alcoholic beverages, salted snacks, fruit preserves and pre-packaged sweetened products.

The amount of tax paid is determined by the units (measured in kilogrammes of litres) of product bought or sold.

Since it was first implemented, the tax has generated around 122 billion Hungarian forint (S$640 million) in revenue.

The Guardian, quoting Dr Eva Martos of the national institute of pharmacy and nutrition in Budapest, reported that large numbers of Hungarians have reduced their consumption of such food products.

For instance, 19 per cent have cut down on soft drinks.

France

A tax targeted at sugary drinks was implemented in 2012, with a levy of €0.72 (S$1.10) per litre. This made soft drinks about 3.5 per cent more expensive in the country.

A report for the European Union Commission in 2016 found that the tax led to a fall in annual soft drink consumption of about 3 to 3.5 litres per person.

The country went a step further this year when it banned all public eateries from selling unlimited sugar drinks at a fixed price or for free, effectively eliminating the usage of self-service "soda fountains" that have been a feature of family restaurants and cafes.

The aim of the law was to "limit, especially among the young, the risks of obesity, overweight and diabetes".

United Kingdom

In its budget last year, the British government said it would be introducing the Soft Drinks Industry Levy from April 2018.

It will apply to the production and importation of soft drinks containing added sugar. The tax rate will be 18 pence (S$0.32) per litre for sugary drinks with a total sugar content of 5g or more per 100ml, and 24 pence for drinks with 8g or more per 100ml.

The levy's objective is to help reduce childhood obesity and encourage soft drink producers to reformulate their products or reduce portion sizes.