Katherine Rich: Realistic support more effective than sugar tax

In New Zealand the unit sales of sodas have declined by 4.7 per cent in the past 12 months and that's without a sugar tax. Photo / iStock

Professor Rod Jackson is a highly respected academic but his call yesterday for a tax on sugary drinks overlooks some realities about the nature of taxes and their lack of impact on actual sales volumes.

The first thing that many don't appreciate is that the sugar tax being discussed is an excise tax, not a consumption or sales tax. This means that companies pay the tax to the Government and then, like any other cost to their business, apply the cost of the tax over their whole business. Most companies manufacturing soft drinks also manufacture other things such as tea, coffee, bottled water, fruit juices and milks.

This is what has happened in Mexico, where companies spread the new taxes over all their products, meaning that the price to consumers of all beverages increased. Even the price of bottled water went up and, what's more, prices rose more than could be explained by the tax.

Pro-tax commentators never explain how the excise tax on a corporate business might change the behaviour of someone who is overconsuming sugar. It seems they assume that a tax will create a price gap between sugar and non-sugar drinks. As mentioned, this did not occur in Mexico and some will be surprised to know that according to Nielsen sales data the average prices for sugar-sweetened soda remained significantly lower than low or zero sugar sodas, meaning there has been absolutely no price signal to consumers to make any change.

The final point is about sales volumes. Mexico has been hailed as the key success of a sugar tax and a published paper in the respected British Medical Journal has been shopped around as rock solid evidence. The paper, co-authored by well-known sugar tax campaigner Professor Barry Popkin, analysed data from Nielsen's Home Panel network in 2014. It concluded that there had been a tiny decline in consumption. However, this paper's finding has now been overtaken by real events in Mexico where sales volumes have bounced back.

The most up-to-date sales data from Mexico (to December 2015) reveals that sales volumes have returned to near pre-tax levels. There is still a slight decline in the sale of sodas of less than 1 per cent, but to put that into context, here in New Zealand the unit sales of sodas have declined by 4.7 per cent in the past 12 months and that's without a sugar tax.

As many governments around the world struggle to balance their books and look at new ways of raising taxes, there will be more food taxes applied, and what better excuse for politicians than doing so in the name of public health.

The reality is that sugar taxes are a great way to raise large amounts of money, but because of the disconnect between an excise tax on companies and personal decisions, there's no evidence they actually do anything to change behaviour or reduce obesity.

There are many other ways to change behaviour and create healthier environments and I've seen some powerful examples in the past six months, particularly from government department heads who are using thought leadership, not regulation, to change minds.

Last Monday Peter Hughes, Secretary of Education, sent a letter to all schools encouraging them to adopt water and milk-only policies. This is a major shift for the ministry, which has previously told me these are matters for schools to decide. Hughes knows many schools already maintain a healthy drinks policy. It was disappointing to industry that after the 2009 Voluntary Schools Agreement, in which major companies agreed not to sell sugary sodas to schools, some canteens chose to buy through other vendors.

Chai Chuah, director-general of the Ministry of Health, has used his role to nudge thinking within district health boards. His letter to them last September encouraging them to create healthier food environments was probably the first time a director-general had made such a direct request.

Of course, the interpretation and implementation of these requests is important, but both leaders appear to be encouraging sensible and realistic approaches without creating Spartan hospital fare or shared-lunch food police.

These letters have already triggered more sensible action to encourage healthier food consumption in New Zealand than any tax ever would.

Katherine Rich is chief executive of the New Zealand Food and Grocery Council.

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