Higher soda tax may help consumers tighten their belt

"In absolute terms, the difference in tax over a year can be considered negligible, but the weight change could be significant, making these changes very cost effective," Anurag Sharma says. (Credit: Eric Allix Rogers/Flickr)

A tax on sweetened soft drinks could be an effective weapon in the war against obesity, generating an annual weight losses of up to 3.64 kilograms or eight pounds, researchers predict.

“Many nutrition experts think that consumption of sweetened beverages may be the single largest driver of the obesity epidemic,” says Anurag Sharma of the Centre for Health Economics at Monash University. Such a tax could have important policy and welfare implications.

“Taxes on unhealthy foods are attractive because they not only generate tax revenue that can be used for public health care, they also promise health benefits for individuals.”

Soft-drink taxes already apply in some countries, and many US states tax carbonated drinks at an average rate of 3.5 percent.

Find the sweet spot

A more substantial tax would be needed to reduce consumption rates, Sharma says. The researchers compared the effects of a 20 percent sales tax and a 20 cents per liter tax, assessing the impact on all income groups.

Although both taxes would be regressive, representing a greater proportion of lower incomes than higher ones, the proposed rates would keep this effect mild, Sharma says.

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A 20 percent sales tax would raise annual costs per person by about $15 to $17. But in weight-loss terms, average consumption would drop by more than 10,000 kilojoules, or about 2,400 calories, in three months, with about one third of a kilo, or about .75 pounds, coming off the scales. Those who had been heavier consumers would lose more—between 1 and 2 kilos, or about 2 to 4.5 pounds.

“In absolute terms, the difference in tax over a year can be considered negligible, but the weight change could be significant, making these changes very cost effective,” Sharma says.

The effect would be even more striking if a 20 cents per liter volumetric tax were applied. While still imposing a relatively low tax burden, it could lead to weight reductions of up to 3.64 kilograms—8 pounds—in middle-income heavy consumers of sweetened beverages.

This was chiefly because although a sales tax would have a bigger effect on the price of single bottles, a volumetric tax meant those buying large quantities or discounted multipacks would face much steeper price increases.

Additional researchers from Imperial College London, University of York, and Lancaster University contributed to the study.

The Australian Research Council supported the study and data was provided by VicHealth. The findings are published in Health Economics.

Source: Monash University