The growing concern about public health has prompted governments around the world to implement fiscal measures with the objective of reducing the consumption of foods deemed to be harmful to health. In Brazil, this issue has assumed greater significance in recent years, giving rise to a discourse on the optimal means of implementing a charge on sugar-sweetened beverages (SSBs). Meanwhile, in Canada, the issue is a subject of ongoing debate, with some provinces having already implemented the tax and others considering its adoption. In this context, the taxation of sugary drinks has emerged as an effective strategy for mitigating sugar consumption and, consequently, the incidence of obesity and diabetes, which have reached epidemic proportions, leading to high costs for health systems. This article examines the relevance of the “sugar tax” in the health and political spheres. It offers an analysis of the risks associated with excessive consumption of sugary drinks, as well as an examination of opposing arguments and strategies to maximize the benefits of this application. By dissecting the frameworks that support or hinder the introduction of a levy on sugar-sweetened refreshments, this paper concludes by highlighting the taxation of sugary drinks as a viable solution for improving public health.

Reasons for Resistance to Taxation

The introduction of the sugary drink charge has encountered considerable opposition, supported by a multifaceted network of arguments and interests. The principal arguments advanced by those in opposition include concerns about the potential negative economic consequences and issues of social justice. The beverage industry has invested significant resources in contesting the tax, asserting that it has adverse effects on businesses and results in job losses. Furthermore, related economic sectors, such as retail and agriculture, have also voiced opposition to the measure, citing concerns about the potential cascading effects of reduced consumption of sugary refreshments. Into the bargain, some commentators have questioned the efficacy of taxation, arguing that the levy burden is borne disproportionately by low-income populations, who tend to consume more sugary drinks and have less capacity to absorb price increases, thereby exacerbating social inequalities.

One of the primary arguments against the “sugar tax” is its potential negative economic consequences. Those with opposing views contend that the price surge of sugary refreshment due to taxation will inevitably result in a decline in consumption. A decline in demand will have a cascading effect on the economy, particularly in the beverage industry, which may experience significant job losses as a result. In Powell’s analysis, a 20% tax on SSBs is estimated to result in a net employment increase of 4406 jobs in Illinois and 6654 jobs in California in the drink sector. Moreover, related sectors, such as retail and agriculture, may also experience adverse effects due to the reduction in demand for inputs utilized in production. In regions where the beverage industry constitutes a substantial proportion of economic activity, the consequences would be particularly pronounced, resulting in diminished charge revenues and a deceleration of economic growth.

In addition, another compelling argument pertains to its potential implications for social justice. Low-income populations consume a significantly higher proportion of sugary refreshments compared to high-income populations, according to the World Health Organization. This phenomenon can be attributed to a number of factors, including the reduced availability of nutritious foods in low-income areas and the constrained household incomes that restrict access to healthier alternatives. The consequence of increasing the price of these beverages is that taxation impacts this segment of the population in a manner that is disproportionate to other segments of the population. This is particularly problematic given that this segment of the population already struggles to secure adequate nutrition. As a result, the most vulnerable families bear a greater financial burden, which may result in a reduction in their access to the fundamental right to adequate food.

Effectiveness of Sin Taxes on Sugary Drinks

Despite the arguments presented, a growing body of scientific evidence supports the effectiveness of the Sin taxes on sugary drinks as a powerful tool for promoting public health and preventing chronic diseases. Rigorous studies, rely on longitudinal data, and conducted in various countries that have implemented this measure consistently demonstrate a significant reduction in the consumption of sugary refreshments. This reduction is directly correlated with improvements in health indicators, including a decline in the prevalence of obesity and type 2 diabetes. Moreover, the imposition of a sugar tax incentivizes the beverage industry to develop lower-sugar products, promoting innovation and healthier consumer choices. Therefore, the strength of the scientific evidence, when considered alongside the proven health benefits, establishes the sugar levy as an effective public policy for addressing chronic diseases.

The potential cost savings in public health are a highly relevant political issue, particularly in light of the recommendations put forth by the World Health Organization (WHO). The implementation of a 20% charge on unhealthy products, as proposed by the WHO, has the potential to generate significant savings in healthcare costs in Brazil over a 10-year period, estimated at R$81 billion. In the United States, a one-cent-per-ounce tax on sugary drinks has the potential to result in savings of over $17 billion over a ten-year period. In this regard, a significant enhancement of the healthcare system can be achieved by reinvesting the saved resources into public health programs.

Furthermore, these taxes are not necessarily regressive, evidence suggests that sugar-sweetened beverage taxation policies have had a positive impact on low-income populations. Colchero suggests that these populations tend to significantly reduce their consumption of such drinks following the execution of the charge, which has resulted in notable improvements in health indices. To illustrate, in Mexico, low-income families exhibited a 11.7% decline in their consumption of sugary refreshments subsequent to the tax’s application, whereas the general population demonstrated a 7.6% reduction. This behavioral change results in a reduction of diseases associated with excessive sugar consumption, such as diabetes, which in turn leads to significant savings in medical expenses. As a result, these benefits would be progressive, once impoverished populations ultimately benefit in terms of both health and household budgets.

Mechanisms for Maximizing Benefits

The execution of the sugar tax represents a crucial step in promoting public health. However, its effectiveness can be significantly enhanced when combined with other public policy strategies. It is of the utmost importance to emphasize that the implementation of the charge on SSBs necessitates the continuous monitoring and rigorous evaluation of its impacts. Based on the results obtained, it is possible to make adjustments to the levy rate, expand or reduce the scope of the measure, and direct investments with greater precision. Consequently, it is possible to direct the tax revenues generated both directly into the healthcare system and into the food industries.

In this regard, the revenues generated by the sugary drink charge represent a distinctive opportunity to invest in public policies that advance the health of the population. Investment in the democratization of access to healthcare and the strengthening of public health policies, particularly in areas where low-income families reside, has the potential to reduce social inequalities. By directing the collected resources toward actions that complement the taxation, a virtuous cycle can be created. The reduction in sugar consumption will generate resources that can be used to promote the treatment and prevention of diseases, thus creating a self-sustaining system.

Moreover, a substantial proportion of the funds generated by the Sin tax on SSBs can be allocated to initiatives that foster innovation within the food industry. Reformulation in soft drinks is desirable for public health, but budget officials must prepare to cope with lower-than-expected revenue.  The UK Government introduced a Soft Drinks Industry Levy (SDIL) in April 2018 to tackle childhood obesity by encouraging manufacturers to reduce the sugar content in the soft drinks.  The levy is a tiered system that imposes a higher volumetric tax for drinks with higher sugar content. The soft drinks manufacturers were given two years and encouraged to reformulate products and bring their sugar content below the taxable thresholds. About 50 percent did. This strategy has the additional benefit of diversifying product offerings in the market.

Conclusion

This article presents a review of the arguments for and against the implementation of the sugar tax, with a particular focus on evidence supporting its effectiveness in reducing sugar consumption and improving public health. In this regard, it is irrefutable that this execution represents a pivotal strategy for combating obesity and diabetes, particularly in low-income populations that are disproportionately affected by these diseases. In light of the aforementioned evidence, it can be concluded that the charge on sugar-sweetened beverages, when combined with other public policy strategies, has the potential to generate significant benefits for public health. These benefits include healthcare cost savings, the development of the food industry, and improvements in the population’s quality of life. It is therefore recommended that governments consider applying the sugary drink tax as a strategic investment for the future of public health.