Milly Gaines
Sugar-sweetened beverages (SSBs) have been taxed in over 50 countries, including the US, UK, Mexico, France, and Malaysia. These taxes are intended to reduce sugar consumption and improve public health, particularly in relation to obesity and type 2 diabetes. While some jurisdictions have included diet drinks in SSB taxes, others have excluded them. Evidence suggests that excluding diet drinks can incentivize their consumption and supply, while including them may be supported by new evidence on the health effects of artificial sweeteners.
Do diet drinks have sugar tax?
| Characteristics | Values |
|---|---|
| Number of countries with sugar tax | 50+ |
| Number of US jurisdictions with sugar tax | 8+ |
| Sugar tax in France | Applied to both regular and diet soft drinks |
| Sugar tax in Berkeley, California | Diet sodas are excluded |
| Sugar tax in Philadelphia | Applied to artificially sweetened beverages |
| Sugar tax in Malaysia | Implemented on 1 July 2019 |
| Sugar tax in Mexico | Implemented in 2014 |
| Sugar tax in UK | Sales of low- and zero-sugar drinks rose in the first three years |
| Sugar tax in Dominica | Implemented in 2015 |
| Sugar tax in Fiji | Import tax and excise tax on soda |
| Sugar tax in Finland | Reintroduced in 2011, dropped in 2017 |
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What You'll Learn
Sugar taxes aim to reduce obesity and type 2 diabetes
Sugar taxes are levies placed on sugar-sweetened beverages (SSBs) and other products with high sugar content. The aim of these taxes is to reduce the consumption of sugar, which has been linked to various health issues, including obesity and type 2 diabetes. Over 50 countries have implemented taxes on sugar-sweetened beverages, and many more are considering similar measures.
SSBs are non-alcoholic beverages that contain added sugars, such as carbonates, fruit drinks, sports drinks, and energy drinks. These drinks are affordable and easily accessible, which contributes to their high consumption. The main goal of SSB taxes is to decrease the consumption of these harmful beverages by making them more expensive. This approach has been successful in multiple countries, including Mexico, the United Kingdom, and South Africa, where SSB taxes have led to reduced sales and consumption of sugary drinks.
In Mexico, for example, a volumetric SSB tax of 1 peso per liter was introduced in 2014. This resulted in a price increase of about 11% for soft drinks, leading to a reduction in purchases and consumption of these drinks. A 2021 study in Mexico also found that SSB taxes helped reduce obesity in adolescent girls, with a 3% decrease in the likelihood of being obese or overweight within two years of the tax's implementation.
In addition to reducing obesity, SSB taxes are also associated with a decreased risk of type 2 diabetes. A study by the American Heart Association estimated that a national, volume-based SSB tax in the United States could prevent 269,000 cases of diabetes. Furthermore, 184,000 annual deaths worldwide were attributed to SSB consumption in 2010, with 72% of those deaths due to type 2 diabetes.
While SSB taxes have shown promising results, it is important to note that they are not the only solution to addressing obesity and type 2 diabetes. Communities are also exploring ways to incentivize healthier choices and increase access to healthier options. Additionally, the effectiveness of SSB taxes in reducing consumption and improving health outcomes may vary across different populations and regions.
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Over 50 countries have implemented sugar taxes
Sugar taxes are often implemented to discourage unhealthy diets and offset the growing economic costs of obesity, diabetes, and dental cavities. They are also intended to reduce the health and economic burden of dental caries. Over 50 countries have implemented sugar taxes, also known as sugary drink taxes, sugar-sweetened beverage taxes, or SSB taxes. These taxes are in effect across all World Bank regions, including national-level taxes in more than 100 countries and territories.
The number of implemented SSB taxes changes frequently, and design changes to existing tax policies are common. Some countries with SSB taxes include Mexico, the United Kingdom, South Africa, France, Malaysia, and Dominica. In the United States, there is no nationwide soda tax, but several localities and states have implemented taxes on sugar-sweetened beverages.
SSB taxes can be structured in various ways, including specific taxes based on quantity (e.g., volume or sugar content), ad valorem taxes calculated as a percentage of the price, or mixed taxes containing both specific and ad valorem elements. Value-added tax (VAT) is another common form of taxation, added to the purchase price at the time of purchase, proportional to the item's value.
The inclusion of diet drinks in SSB taxes is a subject of debate. While some countries exclude them, new evidence on the health effects of artificial sweeteners may prompt governments to consider their inclusion. Diet drinks are often sweetened with low/zero-calorie sugar substitutes or artificial sweeteners, and their exclusion can strongly incentivize their supply and consumption. However, artificial sweeteners like aspartame have been classified as 'possibly carcinogenic to humans' by the International Agency for Research on Cancer (IARC).
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Tax design approaches include direct and indirect taxes
Sugar taxes are aimed at reducing sugar consumption and improving public health. Over 50 countries have implemented taxes on sugar-sweetened beverages (SSBs). These include taxes on most soft drinks, energy drinks, sweetened waters, juices, milk-based drinks, and concentrates used to prepare soft drinks.
On the other hand, indirect taxes are levied on goods and services and can be passed on or shifted to another entity or individual. Examples of indirect taxes include import/export taxes, sales tax, value-added tax (VAT), and excise taxes. For example, in the context of SSB taxes, the cost of the tax is embedded in the price of the product, and the consumer ultimately pays the tax when purchasing the item.
In the context of SSB taxes, indirect taxes can be specific, ad valorem, or mixed. Specific taxes are based on the quantity, such as the volume or sugar content of the drink. Ad valorem taxes are calculated as a percentage of the wholesale or retail price. Mixed taxes contain both specific and ad valorem elements.
When considering whether to include diet drinks in SSB taxes, there are several factors to consider. Excluding diet drinks can lower industry opposition and incentivize their supply and consumption. However, new evidence on the health effects of artificial sweeteners may prompt governments to tax these drinks. Additionally, taxes based on sugar content will need additional provisions for diet drinks. One option is to use a mixed tax structure, taxing drinks containing artificial sweeteners based on volume.
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Some diet drinks are exempt from sugar taxes
Sugar taxes are implemented by governments to reduce sugar consumption and improve public health. They are also known as soda taxes and are aimed at reducing the health and economic burden of dental caries. While sugar taxes are usually levied on sugar-sweetened beverages, some diet drinks are exempt from these taxes.
In Berkeley, California, a tax of one cent per ounce is imposed on distributors of sugar-sweetened beverages such as soda, sports drinks, energy drinks, and sweetened ice teas. However, diet sodas are specifically excluded from this tax. Similarly, France introduced a targeted tax on non-alcoholic sugary drinks in 2012, which applies to both regular and diet soft drinks, but only if they contain added sugars. Unsweetened bottled water and diet drinks are exempt from this tax.
Excluding diet drinks from sugar taxes can incentivize their supply and consumption, as seen in the UK and Catalonia, Spain. Sales of low- and zero-sugar drinks increased significantly in the UK after the announcement of the Soft Drink Industry Levy, indicating that consumers switched to these drinks ahead of the tax implementation. However, artificial sweeteners commonly found in diet drinks have been linked to potential health risks. Aspartame, one of the most widely used artificial sweeteners, has been classified as 'possibly carcinogenic to humans' by the International Agency for Research on Cancer (IARC).
While some jurisdictions choose to exclude diet drinks from sugar taxes, others include them. For example, Philadelphia is the only city in the US to apply an excise tax to artificially sweetened beverages. The inclusion or exclusion of diet drinks in sugar taxes is a complex issue that requires careful consideration of public health goals, industry opposition, and evolving scientific evidence on the health effects of artificial sweeteners.
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Evidence suggests excluding diet drinks incentivises their consumption
Sugar-sweetened beverages (SSBs) are a leading source of added sugars in the American diet and are associated with serious negative health outcomes, including type 2 diabetes, obesity, heart disease, and liver disease. Over 50 countries have implemented taxes on these drinks, and studies show that these policies have increased prices, reduced sales and consumption, and encouraged product reformulation to reduce sugar levels.
While SSB taxes have been effective in reducing the consumption of sugary drinks, the question of whether to include diet drinks in these taxes has been more complex. On the one hand, diet drinks are often promoted as healthier alternatives to SSBs because they are sweetened with low- or zero-calorie sugar substitutes, also known as artificial sweeteners. However, evidence from the UK and Catalonia, Spain suggests that excluding diet drinks from SSB taxes can incentivise their consumption.
In the UK, sales of low- and zero-sugar drinks (excluding unsweetened water) rose significantly in the three years following the announcement of the Soft Drink Industry Levy (SDIL). This provides evidence that leaving these drinks out of SSB taxes can increase their supply and consumption. Additionally, excluding diet drinks from SSB taxes can lower industry opposition and make it easier for governments to adopt new taxes, with the potential to include these drinks in the tax structure at a later date.
However, new evidence on the health effects of artificial sweeteners may prompt governments to reconsider taxing diet drinks. Aspartame, one of the most widely used artificial sweeteners, has been classified as 'possibly carcinogenic to humans' by the International Agency for Research on Cancer (IARC). While the Food and Agriculture Organization/WHO Joint Expert Committee on Food Additives deemed the evidence for cancer in humans 'not convincing', the potential health risks of artificial sweeteners may influence tax policies.
In conclusion, while excluding diet drinks from SSB taxes can incentivise their consumption and reduce industry opposition, the potential health risks associated with artificial sweeteners may outweigh these considerations. Governments may need to balance the potential benefits of increased tax revenue and reduced opposition with the potential risks to public health.
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Frequently asked questions
It depends on the region. France includes diet soft drinks in its beverage tax, while Berkeley, California, does not.
Excluding diet drinks from sugar tax can lower industry opposition and incentivize their supply and consumption.
Aspartame, one of the world's most widely used artificial sweeteners, has been classified as "possibly carcinogenic to humans" by the International Agency for Research on Cancer (IARC).
Sugar taxes have been shown to reduce the purchase and consumption of sugary drinks. In five US cities, sugary drink purchases declined by 33% following the implementation of a sugar tax.
Berkeley, California, implemented a tax of one cent per ounce on sugar-sweetened beverages. Mexico introduced a volumetric sugar-sweetened beverage tax in 2014 at a rate of 1 peso per liter.
