22
Nov
2016

Sugary drinks cost us dearly and should be taxed

by Stephen Duckett


Published by The Canberra Times, Tuesday 22 November

Almost one third of Australians are obese and, like our waistlines, the proportion of people who are obese is increasing. The growth in obesity rates is principally due to us eating and drinking more – energy in – while our activity levels – energy out – has remained relatively unchanged.

What we eat and drink is a personal choice, but it is often an uninformed choice – the nutritional information is hard to understand and people ignore the long-term consequences of eating too much. Normally I would say that personal choices are just that, personal. We get benefit and enjoyment from our choices, but we may not fully take into account the long-term costs of those choices.

Unfortunately, increased rates of obesity impose costs on all of us, not just the people who do the consuming. Obese people use more health services than non-obese people. They have more prescriptions for medications. They are less likely to be employed and so pay less tax. Together these costs add up – to more than $5 billion in costs to the taxpayer every year.

One of the causes of obesity is the consumption of drinks with added sugar. These sugary drinks mostly contain no beneficial nutrients but are energy-dense. About 5 to 20 per cent of obesity could be attributed to consumption of these sugar-sweetened beverages. Let’s assume it’s about 10 per cent. That means the consumption of these drinks is costing the Australian taxpayer about $500 million a year. Yet the consumers of these drinks neither know nor face these costs.

A Grattan Institute report to be released today recommends a tax on sugar-sweetened beverages to reduce consumption and recover some of these costs. A tax of 40¢ per 100 grams of added sugar in water-based, non-alcoholic drinks with added sugar should raise about $500 million each year initially, possibly dropping to about $400 million a year as people change their habits and manufacturers reformulate their products.

A “sugar tax” structured that way will increase prices by about 15 to 20 per cent, depending on how much sugar is in the drink. The price of a two-litre bottle of soft drink would increase by about 80¢.

A price increase of this size should lead to a drop in consumption too, leading to a small reduction in rates of obesity.

This is hardly a radical proposal: numerous countries have already introduced such a tax, including Britain, France and parts of the United States.

The additional revenue raised by the tax in Australia could be used for budget repair or spent on obesity reduction campaigns.

This is an economic and public health reform whose time has come.