The Sugar Tax: An indulgence for soft drink giants, or a catalyst for public health?

Recently, news that Singapore is introducing grading for sugary drinks and an imminent ban on advertising for milk tea and juices has sparked heated debate in China.

● From 30 December 2022, Singapore introduced Nutri-Grade, a grading system designed to help consumers identify the sugar and saturated fat content of beverages. Image source: Today Online

In truth, Singapore is not the first nation to intervene in the sale of sugar-sweetened beverages. Over a decade ago, policymakers began introducing regulations to manage these drinks, with taxation proving to be one of the most rapid ways to see results. It is estimated that more than 80 countries and regions worldwide now impose a sugar tax.

In March 2016, the UK government announced the nationwide implementation of the ‘Soft Drinks Industry Levy’ (SDIL). This tax targets beverages with a sugar content exceeding 5g/100ml and officially came into effect in April 2018. It was reportedly the largest sugar tax ever implemented by a developed nation.

But what does 5g/100ml actually mean in practice? The classic Coca-Cola recipe contains more than double this threshold, at 10.6g/100ml, while Sprite is slightly lower, yet still reaches 8.6g/100ml.

● Next time you buy a fizzy drink, why not check the ingredients list and work out the sugar content?

But wait, what’s wrong with a fizzy drink? Why go to such lengths to tax sugary drinks? What risks do they actually pose to public health? To find out, we first have to look at ‘sugar’ itself.

I.“Toxic” Sugar

We have heard plenty about the health risks associated with sugar.

In reality, sugar occurs naturally in carbohydrate-rich foods such as fruit, vegetables and whole grains. When released through normal digestion, these sugars provide a steady source of energy for the body’s cells, playing a vital role in maintaining our strength and vitality.

Sugar itself is innocent; it is only when the modern food industry refines it for convenience, and then—driven by profit—adds it in excessive quantities to processed foods, that sugar spirals out of control, becoming a ticking time bomb for human health.

These two entirely different ways of consuming sugar are known as intrinsic sugars and free sugars. If you keep an eye on ingredients lists, you will notice that the sugars commonly found in sweetened drinks—such as white sugar, corn syrup and concentrated fruit juice—all fall into the category of free sugars.

● Sugars obtained by eating fresh fruit and vegetables are known as intrinsic sugars; ingredients such as high-fructose corn syrup and concentrated lime juice in sugary drinks are free sugars, sometimes also referred to as added sugars.

The World Health Organization (WHO) has clearly stated that the consumption of free sugars is a significant factor in the rising global numbers of obesity and diabetes. Unlike the way intrinsic sugars are obtained from whole foods, excessive free sugars in the diet can significantly increase blood glucose and insulin levels, raising the risk of becoming overweight, tooth decay, and other diseases.

Among the various sources of free sugar consumption, sugar-sweetened beverages (SSBs) set off the most urgent warning lights. The WHO believes that drinks with high free sugar content may be a primary reason why people today (especially children and young adults) consume excessive calories, with 184,000 deaths worldwide each year attributable to the consumption of sugar-sweetened beverages.

● According to WHO guidelines, daily intake of free sugars should be less than 10% of total energy requirements, and ideally further limited to 5%. This roughly translates to 22 grams, meaning it is best not to consume more than 250ml of sugar-sweetened beverages per day.

It is little wonder, then, that countries worldwide have introduced sugar-reduction policies for sugar-sweetened beverages in the interest of protecting public health.

II. The Stick: Taxing Sugary Drinks

Among the diverse array of sugar-reduction policies, the introduction of a sugar-sweetened beverage (SSB) tax is one of the most favoured by policymakers.

At the end of 2022, the WHO published its first global guidelines on taxes on sugar-sweetened beverages, urging countries to increase the retail price of these drinks through taxation to discourage consumption. According to the guidelines, the WHO believes that retail prices must be increased by at least 20% to see a corresponding decrease in consumption.

Similar to the sugar tax are taxes on tobacco and alcohol, both of which have a longer history of implementation and are even known by the evocative nickname: ‘sin tax’.

The design logic behind sin taxes is influenced by the ‘nudge theory’ of behavioural economics. Nudge theory posits that individuals often struggle to make the most rational choices in a market; therefore, the external environment must be altered—via taxes or sales bans, for example—to guide individuals toward better economic decisions.

● As a relatively new economic theory, ‘nudging’ remains a subject of debate within academia. Some scholars argue that it extends the boundaries of public sector intervention into individual liberty, often sparking disputes between different schools of economic thought. Image source: The Economist

The impact of taxation is self-evident, but the effectiveness of “nudging” individuals often falls short, as reality is far more complex than any economic model.

For instance, a common question regarding sugar tax policies is: once price hikes reduce the consumption of sugary drinks, what happens next? Will consumers with a sweet tooth, driven by the brain’s reward system, simply turn to other processed foods to satisfy their cravings? Significant uncertainty remains regarding the complexities of individual purchasing behaviour and dietary choices.

Other critics challenge the core premise of nudge theory, questioning why individuals struggle to make rational consumption choices. Attributing this solely to a lack of judgement or self-control is unconvincing; if the issue is truly pursued, the companies that relentlessly produce addictive sugary drinks are likely the real source of the vice.

● *Salt Sugar Fat* tells the story of how various multinational food giants captured markets through technology, marketing, and political manoeuvring, forcing the public to pay the price with their health. *Empire of Coca-Cola* exposes the economic and social costs lurking behind the success of this global brand.

Michael Moss uses the history of Coca-Cola’s rise, as detailed in *Salt Sugar Fat*, as a classic case study: in the 1970s, Coca-Cola pushed for its branding to be displayed across major US sports stadiums, cinemas, amusement parks, and fairs; from 1980, the strategy shifted towards bundling with fast-food chains. Other common tactics included arranging shelves to suit consumer habits, offering add-on discounts, developing eye-catching packaging, and creating niche products for different consumer demographics… ultimately, Coca-Cola became “omnipresent” in both the public sphere and retail environments.

Craving a can of Coke to beat the heat on a scorching summer day? This seemingly “free” choice is, in reality, an inescapable consumption trap. And the corporations reaping colossal profits from sugar-sweetened beverages cannot evade responsibility for the “sins” they have engineered and the subsequent risks to public health.

● In an era of sugar reduction and sugar-free trends, the new marketing gimmicks for Coca-Cola Zero are everywhere. Image: Foodthink

III. The British Approach to Taxation: Wielding the Stick against ‘Sin’ Industries

The Soft Drinks Industry Levy, which came into effect in the UK in April 2018, put this approach into practice in a way that was both rigorous and innovative. Diverging from the logic of simply raising retail prices, the UK sugar tax does not act directly upon the consumer; rather, it is levied on the manufacturers—the very architects of the current consumption culture.

Under the regulations, if a drink’s sugar content exceeds 5g/100ml, manufacturers must pay the UK government a tax of 18p (1.64 yuan) per litre; if the content exceeds 8g/100ml, the tax increases to 24p (2.19 yuan) per litre. If manufacturers can ensure that the sugar content remains below 5g/100ml, they are entirely exempt from the tax.

● An illustration of the UK’s tiered soft drinks tax; pure fruit juices with no added sugar and dairy-based drinks with high milk content are exempt from the levy. Source: London School of Hygiene & Tropical Medicine

Between the policy’s announcement in March 2016 and its formal implementation in April 2018, manufacturers of sugary drinks were given a full two years to react and reformulate their products. By reducing sugar content, companies could avoid increased production costs and keep retail prices stable.

How effective has this industry-targeted sugar tax been? A big-data assessment supported by the Institute for the Study of Labor provided a definitive ‘yes’ in 2021.

The study, titled ‘Can a Spoonful of Sugar Tax Reduce Caloric Intake?’, comprehensively evaluated the impact of the UK’s SDIL on the pricing, sales, reformulation, and caloric intake associated with sugary drinks since 2018. Overall, the SDIL reduced the average annual caloric intake from sugary soft drinks for UK residents by nearly 6,500 calories, with over 80% of this reduction attributed to the consumption of reformulated, lower-sugar drinks.

● As the IZA study utilised complete electronic point-of-sale (EPOS) data from the UK soft drink supply chain (including supermarket chains), it was able to accurately assess the specific outcomes following the policy’s implementation.

The WHO’s guidance on sugar taxes notes that when the tax scheme came into effect in April 2018, the sugar content per 100ml of products subject to the SDIL decreased by approximately 11%. A report from HM Treasury further reveals that the implementation of the SDIL has led to an estimated annual reduction of around 45 million kilograms of added free sugars in the UK.

Furthermore, research from the University of Cambridge indicates that the SDIL effectively controlled the number of obesity cases among senior primary school pupils in England, and likely prevented over 5,000 cases of obesity among Year 6 girls—a significant contribution to the UK’s effort to tackle the growing problem of childhood overweight.

IV. A Bitter Aftertaste

However, no matter how sophisticated the design, taxation as a means of reducing public health risks cannot resolve the fundamental conflict of interest between the food industry’s pursuit of profit maximisation and the protection of public health.

The essence of ultra-processed foods, such as sugar-sweetened beverages, is to be designed for addictiveness, ensuring they are pleasurable to consume and difficult to stop eating. This is achieved by “scientifically” calibrating the thresholds for salt, fat, or sugar, creating a taste that is delicious without triggering satiety too quickly. This is both the secret weapon that has kept processed foods dominant on supermarket shelves and an open secret within the food industry.

Indeed, driven by the SDIL, the vast majority of UK sugary drink brands used the two-year transition period to reformulate their recipes. However, most companies merely reduced sugar levels to just below the tax threshold (5g/100ml). To maintain the same high level of sweetness, they simply replaced free sugars with sweeteners.

But if sweeteners also carry risks, how exactly is a “less sugar, same sweetness” reformulated recipe healthier than the original?

Last month, the WHO’s *Guideline on the use of non-sugar sweeteners* debunked such superficial sugar-reduction policies. The report stated that non-sugar sweeteners (NSS) are not beneficial for reducing body fat in adults or children; in fact, long-term consumption may increase the risk of type 2 diabetes, cardiovascular disease, and mortality in adults.

● Non-sugar sweeteners refer to all synthetic, naturally occurring or modified non-nutritive sweeteners, excluding sugar alcohols and sugar derivatives such as low-calorie sugars. Pictured is aspartame, an artificial sweetener that has sparked significant debate recently. Image: Web screenshot

These new guidelines are bound to prompt the food industry to make adjustments and respond in how they handle sugar-laden products. More importantly, however, the health risks of non-sugar sweeteners highlight a critical truth: among all attempts to cut sugar, the most effective approach is simply to reduce sweetness and eat fewer processed foods.

After all, drinking the low-sugar fizzy drinks that food companies go to great lengths to promote is not the ultimate solution for health; rather, consuming natural, fresh, and minimally processed foods should be the foundation of a daily diet.