Your crash course in... The factors that are shaping Ireland's sugar tax

IN AN EFFORT to help tackle Ireland’s obesity problem, the government announced a tax on sugary soft drinks as part of Budget 2017. It will mirror the UK’s plan to tackle fizzy drinks, which is slated to kick in from April 2018.

Policymakers here are working to the same deadline, and they will no doubt be studying how the measure has played out in other parts of the world as they shape an Irish version of the law.

Several US cities have recently joined the movement towards extra levies on sugar-sweetened drinks by introducing so-called ‘soda taxes’, following in the footsteps of early movers like France.

With that in mind, here’s what a sugar tax in Ireland might look like, based on how it has gone down in other countries.

Consumption curb?

The idea behind a sugar tax is to curb consumption and ultimately reduce obesity, but there is still a lot of debate around whether it actually works like that.

Shopkeepers pass the extra charge on to customers, who will be discouraged from buying the treat. That’s how it’s supposed to go.

However, as you will see from this recent FactCheck by TheJournal.ie, the habit is harder to kick than first thought. Sugar is highly addictive, so some people aren’t put off by the higher price.

Look at Mexico’s 10% charge on soft drinks, which came into effect in January 2014. Compared to the six-year period before the tax was introduced, soft drink sales in Mexico were actually up, by 6.4% in 2015 and 7% in 2016.

Even after adjusting for population growth, sales were up 1.6% and 1.1% for those years.

There was a similar pattern in France, which has charged 72c on every litre of drinks sweetened with sugar or artificial sweeteners since 2012.

There was a slight fall in consumption in the first year or the tax but small increases in sales year-on-year for the last three years.

Hungary appears to have had more success with its sugar tax, introduced in 2011, but that’s a bit of a facade.

It charges a levy not only on soft drinks but also sweets, chocolate, energy drinks, alcopops, salty snacks and other goodies.

An extra 200 Hungarian Forint (about 65c) is incurred on every litre of syrup or concentrate used to manufacture soft drinks, along with a smaller fee on the price of the drinks themselves.

Demand for drinks fell significantly, but a report for the European Commission showed that demand was decreasing anyway in the years before the tax came into play.

Sales of carbonated soft drinks fell by more than 15% in the three years after the measure was introduced but had already dropped by 13.5% from 2007 to 2011.

UK proposal

The UK model for sugar tax, which will form the basis for Ireland’s tax, is similar to those that have been introduced elsewhere.

It is expected to be broken up into two bands: an 18p (20c) charge per litre on drinks with sugar content above 5g; and a 24p (28c) charge per litre on drinks with more than 8g sugar content.

If the above examples are anything to go by, there will likely be a slowdown in sales growth, rather than a net reduction when the measure kicks in.

So why is the government still arguing that a sugar tax will diminish sales and curb Ireland’s obesity epidemic?

The hope is that a deceleration in sales growth will improve the average Irish person’s body mass index (BMI), an indicator of whether someone is overweight or not.

There isn’t much data on how a sugar tax affects BMI since existing measures overseas have only been introduced in the last few years.

However, the information that is available suggests that average BMIs have either increased or remained static in countries with a soft drinks tax.

Reinvestment

Retailers will be glad to see that the measure has had little impact on sales in foreign markets, while drinks manufacturers will likely market more ‘healthy’ products and move to reduce the sugar content in their current offerings.

So how will the measure benefit public health?

It is hoped that the revenue collected by the taxman will be used to directly fund public health projects that will bring Ireland’s weight problem under control, rather than being funneled into general government revenue that can be spent on anything.

Minister for Health Simon Harris

A working paper prepared by the Department of Health suggested that money raised from the taxes could be reinvested to finance a “healthy lifestyle fund to support healthy lifestyles and behaviours”.

“International experience shows that there is stronger public support for a SSD (sugar-sweetened drinks) tax when it is known that either all or part of the proceeds contributes to obesity prevention,” the paper said.

It recommended focusing on projects that benefit children, young people and families living in vulnerable communities where sugar consumption is higher.