By Thierry Malleret, economist and founder, Monthly Barometer
In our opinion, public concerns about soaring obesity rates make it inevitable that more and more countries will resort to taxing products considered as fueling the epidemic – in particular, high-sugar and highly processed foods.
The U.K. provides the latest, if not imperfect, example of this trend. George Osborne (the U.K. chancellor) just announced in his budget that a sugar tax on canned drinks will be introduced in 2018. It will be levied in two bands: one for total sugar content above 5 grams per 100ml and a higher band for the most sugary drinks (those with more than 8 grams per 100ml).
The tax rate is not yet decided and companies can benefit from the intervening with two years to reformulate their drinks in order to minimize the tax’s impact or avoid it altogether. However, the U.K. Treasury expects the levy to raise GBP $520 million in the first year that will be spent on doubling funding for sport in primary schools.
Not unsurprisingly, this announcement triggered a backlash from the global soft drinks industry, and set new battle lines between business and public policymakers aiming to curb sugar intake. A broad-based tax on sugar itself would have been simpler, braver and far more effective. That this was not the solution suggests the “intensity” of this fight and the phenomenal power of the food industry lobby.
Watch this space: As the rising rate of obesity takes its toll on public health costs, the pressure to tax unhealthy products will inevitably rise.