Sugar (Soda) Taxes (Government Intervention)

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)

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

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