Sugary Drink Tax: An Indulgence for Soft-Drink Makers, or a Nudge for Public Health?

Recently, news of Singapore’s sugar-sweetened beverage (SSB) grading system and an upcoming ban on advertising for milk tea, juice, and similar drinks has sparked heated debate across China.

●Since 30 December 2022, Singapore has introduced its Nutri-Grade labelling system to help consumers identify the sugar and saturated fat content in beverages. Source: Today Online

In fact, Singapore is far from the first country to intervene in the sale of sugary drinks. Over a decade ago, policymakers in various countries began regulating sugar-sweetened beverages, and “raising taxes” has arguably been the fastest-acting approach. By the latest count, more than 80 countries and territories worldwide have introduced a sugary drink tax.

In March 2016, the UK government also announced a nationwide Soft Drinks Industry Levy (SDIL), imposing a tax on beverages with a sugar content exceeding 5 g/100 ml, with the policy set to take effect formally in April 2018. This is reported to be the largest-scale sugar tax ever implemented in a developed country.

So what does 5 g/100 ml actually mean? Classic-formula Coca-Cola contains more than twice that threshold at 10.6 g/100 ml, while Sprite sits slightly lower but still as high as 8.6 g/100 ml.

●Next time you reach for a fizzy drink, why not check the ingredients list and do the sugar maths yourself?

But hold on — what’s wrong with cracking open a can of fizzy “couch-potato bliss water”? Why go to all this trouble to tax sugary drinks? What harm do sugar-sweetened beverages pose to public health? To understand, we have to start with the word “sugar” itself.

I. “Toxic” Sugar

We have heard enough about the health risks of eating sugar.

In truth, sugar occurs naturally in carbohydrate-rich foods such as fruit, vegetables, and whole grains. Released through normal digestion, it provides a steady energy supply to the body’s cells and is an essential part of maintaining our strength and vitality.

Sugar itself is innocent. It was only when the modern food industry found ways to extract sugar conveniently and, driven by profit, multiplied its addition to all manner of processed foods that sugar truly “went rogue” — turning into a ticking time bomb for human health.

These two very different ways of consuming sugar are known as intrinsic sugars and free sugars. If you have ever studied an ingredients list, you will notice that the sugars commonly found in sugary drinks — granulated sugar, high-fructose corn syrup, concentrated fruit juice — all fall under the category of free sugars.

●Eating fresh fruit and vegetables directly provides intrinsic sugars; the high-fructose corn syrup and concentrated lime juice in a particular sugary drink are free sugars, sometimes also called added sugars.

The World Health Organization (WHO) has stated clearly that free sugar consumption is a significant contributor to the rising global prevalence of obesity and diabetes. Unlike intrinsic sugars obtained from whole foods, excessive free sugar in the diet causes blood glucose and insulin levels to spike dramatically, increasing the risk of being overweight, dental caries, and other diseases.

Among the many sources of free sugars, sugar-sweetened beverages (SSBs) raise the loudest alarm. The WHO considers drinks with high free sugar content to be a principal reason why modern people — especially minors and young adults — consume excessive calories, with an estimated 184,000 deaths per year worldwide attributable to SSB consumption.

●According to WHO recommendations, daily free sugar intake should be kept below 10% of total energy requirements, and ideally limited to 5% — roughly equivalent to 22 grams, or no more than about 250 ml of sugary drinks per day.

It is hardly surprising, then, that countries around the world have introduced sugar-control policies targeting sugary drinks to protect public health.

II. The Big Stick: Taxing Sugary Drinks

Among the wide variety of sugar-control policies, a sugary drink tax (SSB tax) is the one most favoured by policymakers.

At the end of 2022, the WHO published its first-ever global guidance on taxing sugar-sweetened beverages, urging countries to use taxation to raise SSB retail prices and thereby reduce consumer purchases. The guidance notes that retail prices would need to increase by at least 20% before consumption would decline correspondingly.

Taxes on tobacco and alcohol share a similar logic, with a far longer track record, and even carry a vivid nickname: sin taxes.

Behind the design philosophy of every sin tax lies an echo of nudge theory from behavioural economics. Nudge theory assumes that individuals struggle to make the most rational choices in the marketplace, and therefore require changes to the external environment — through taxation, bans, and other measures — to steer them towards better decisions.

●As a relatively new economic theory, “nudging” remains contested in academia. Some scholars argue it expands the boundary of public-sector intervention in individual freedom, frequently sparking debates between rival schools of economics. Source: The Economist

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

For example, a question that recurs in debates over the sugary drink tax is: price increases reduce SSB consumption, but then what? Might consumers with a sweet tooth be driven by their brain’s reward system to seek calories from other processed foods to satisfy their cravings? At the individual level, complex purchasing behaviour and food choices remain riddled with uncertainty.

A different line of critique challenges the very premise of nudge theory: why is it so hard for individuals to make rational consumption choices? Blaming it purely on poor judgement and weak self-control does little to convince — if we are to follow the trail of guilt, it is the companies relentlessly producing addictive sugary drinks that are arguably the true source of sin.

●*Salt, Sugar, Fat* tells the story of how multinational food giants seized market dominance through technology, marketing, and political influence — and made the public pay with their health. *The Coca-Cola Empire* exposes the economic and social costs behind the brand’s success.

Michael Moss’s account of Coca-Cola’s rise to power in Salt, Sugar, Fat is a prime example: in the 1970s, Coca-Cola pushed major sports venues, cinemas, amusement parks, and fairs across the United States to display its signage; from the 1980s onward, the company shifted to bundling sales with fast-food chains; common tactics included arranging shelves in the way most convenient to shoppers, offering add-on deals, designing eye-catching packaging, and developing niche products tailored to different consumer segments… The upshot was that Coca-Cola became omnipresent — in public spaces and at the point of sale alike.

When the midsummer heat has you parched and desperate for a cold can of Coke, this seemingly “free” choice is in reality hemmed in on every side by the architecture of consumption traps. And the companies that pocket enormous profits from sugar-sweetened beverages bear no small share of the blame for the “sin” and public-health risks they have manufactured.

●In an era when low-sugar and sugar-free drinks are all the rage, Coca-Cola’s “Zero Sugar” marketing gimmick is everywhere you look. Image: Foodthink

III. The British Tax Hike: The Big Stick Swings at the “Sin” Industry

The UK’s Soft Drinks Industry Levy, effective from April 2018, put this approach into practice with remarkable rigour and innovation. Unlike strategies that simply push retail prices higher, the UK’s sugary drink tax does not target consumers directly — it taxes the manufacturers who single-handedly built the consumer culture.

Under the rules, if a drink’s sugar content exceeds 5 g/100 ml, manufacturers must pay the UK government 18 pence (RMB 1.64) per litre; if sugar content exceeds 8 g/100 ml, the levy rises to 24 pence (RMB 2.19) per litre. If manufacturers can keep the sugar content below 5 g/100 ml, they are entirely tax-exempt.

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

From the policy’s announcement in March 2016 to its formal commencement in April 2018, sugar-sweetened beverage manufacturers were given a full two years to respond and reformulate their sugary recipes. Once a company reduced its sugar content, it could avoid any increase in product costs and keep the price tags on retail shelves steady.

How effective was a sugary drink tax levied on businesses? A big-data assessment supported by the Institute for the Study of Labor (IZA) offered a positive answer in 2021.

Titled “Can a Spoonful of Sugar Tax Reduce Calorie Intake?”, the study provided a comprehensive assessment of the SDIL’s impact on the prices, sales, reformulation, and calorie consumption of sugar-sweetened beverages in the UK since 2018. Overall, the SDIL led to a reduction of nearly 6,500 calories per year from sugar-sweetened soft drinks for the average UK resident, with over 80% of that decline attributable to the consumption of reformulated, lower-sugar beverages.

● Because the IZA study obtained complete electronic point-of-sale (EPOS) data from the UK soft drinks supply chain (including chain supermarkets), it was able to evaluate the policy’s concrete effects with considerable accuracy.

The WHO’s sugar tax manual notes that when the levy came into force in April 2018, the sugar content of products subject to the SDIL fell by approximately 11% per 100 ml. An HM Treasury report further estimated that the SDIL reduced the annual addition of free sugar in the UK by around 45 million kg.

A Cambridge University study indicated that the SDIL effectively curbed the number of obesity cases among upper primary-school pupils in England and very likely prevented more than 5,000 cases of obesity among Year 6 girls — a finding of major significance for the UK in addressing its increasingly pressing problem of childhood overweight.

IV. A Bitter Aftertaste

Yet no matter how exquisitely designed, the approach of using taxation to reduce 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 engineered for addictiveness — to make people feel happier eating and to keep them eating. This is achieved by “scientifically” calibrating the critical thresholds for salt, fat, or sugar, so that food tastes delicious yet does not trigger satiety too quickly. It is both the secret to the enduring shelf dominance of processed foods and the food industry’s open secret.

To be sure, driven by the SDIL, the vast majority of UK sugar-sweetened beverage brands used the two-year grace period to reformulate. But most simply trimmed their sugar content to just below the tax-free threshold (5 g/100 ml), and to preserve their original, intensely sweet taste, they turned to non-sugar sweeteners to replace the free sugars they had removed.

But if non-sugar sweeteners carry their own risks, then how exactly is a reformulated recipe that promises to “cut the sugar without cutting the sweetness” healthier than the old one?

Sure enough, the WHO’s guideline Use of Non-Sugar Sweeteners, published just last month, has exposed the futility of this band-aid approach to sugar reduction. The report concludes that non-sugar sweeteners do not help reduce body fat in adults or children, and that long-term use may actually 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-alcohol and low-calorie sugar derivatives. Pictured is aspartame, an artificial sweetener that has recently sparked heated debate. Image: online screenshot

This new guideline is certain to prompt the food industry to make further adjustments and responses regarding its sugar-related products. But more importantly, the health risks of non-sugar sweeteners hit at the crux: 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 soft drinks that food companies push through every conceivable marketing avenue is no ultimate solution for health. Eating natural, fresh, and minimally processed foods should be people’s everyday baseline.