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.
