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Unintended consequences of proposed soft drink sugar tax

Tue, 29 Jan 2013

The introduction of a sugar tax on soft drinks could have unintended consequences that would be harmful rather than helpful to consumers according to an expert at the University of East Anglia.

Responding to today’s call by leading medical bodies for a 20p-per-litre levy on soft drinks to be included in this year's Budget Paul Dobson Professor of Business Strategy and Public Policy at the University of East Anglia commented: “Proponents say that such a levy would raise over £1 billion in duty based on the assumption that consumption will remain at 5727 million litres of sugary soft drinks a year.

“International evidence suggests that such a tax would skew sales away from the targeted products but not necessarily towards healthier ones like diet drinks or water. A major beneficiary could be beer or other alcoholic drinks.”

Prof Dobson who has conducted extensive research on food and drink pricing added: “This tax could hit consumers hard since not only would sugary soft drink prices rise with such a tax but also the prices of potential substitute products would likely rise under the umbrella of the tax-induced price rises. The result will be inflationary and hurt consumers at a time when they can ill-afford to face even higher prices.”

As seen by Denmark’s now abandoned ‘fat tax’ the duty raised from such a tax would likely be significantly below that claimed.

“The government should consider the costs and benefits of such a tax before making a hasty decision while also considering the merits of other measures like the decision by New York City to limit the sizes of sugary drinks sold at eateries” said Prof Dobson.