Arguments against a sugar-sweetened beverage (SSB) tax in Australia

The Australian beverage industry is strongly opposed to the introduction of a tax on SSBs. Opposition is led by the Australian Beverages Council, which is the peak body for the non-alcoholic beverages industry. In June 2018, the council announced that its members would voluntarily reduce sugar across the industry by an average of 20% by 2025.¹ As Pledgees, including Asahi Lifestyle Beverages, Coca-Cola Europacific Partners, Coca-Cola Australia and PepsiCo, have reduced 18% of sugar in their portfolios between 2015 and 2022, a stretch target was increased to 25%.¹ Council chief executive Geoff Parker said the industry was “serious about supporting healthier lifestyles” and had “an important role to play in helping Australians to reduce their sugar consumption.”² Health groups were sceptical about the announcement, which they viewed as an attempt to stave off a tax on sugary drinks in Australia:³ they noted that individual products would not contain 20% less sugar, and much of the reduction would flow from consumers switching to low-sugar alternatives.³ According to the Australian Beverages Council, the most common techniques used by manufacturers to reduce sugar levels are increasing sales of low/no sugar options and reformulation, with other options including reducing container sizes and capping sugar content in new and existing drinks.¹

The WHO asserts that arguments against taxes are usually either false or greatly overstated.⁴ The case for a tax on sugar-sweetened beverages in Australia is outlined in a previous section. Some of the industry’s key arguments against an SSB tax, and responses from public health advocates, are outlined below.

1. Individual responsibility – but costs are borne by government

The industry argues that individuals are responsible for adopting healthier lifestyles, and governments should not seek to interfere with personal choice by influencing decisions about what to buy and eat. However, governments face significant obesity-related costs, such as health and welfare, foregone tax revenue and reduced productivity. The Grattan Institute concludes that these third-party costs justify an SSB tax, even if the significant individual costs of obesity are ignored or considered a matter of personal responsibility.⁵

The industry claims that SSBs can be enjoyed as part of a balanced diet ignores evidence of a significant dose-response relationship between SSB consumption and long-term health risks (e.g., weight gain and risk of type 2 diabetes). Research suggests that SSBs can stimulate appetite, and soft drink consumers, in particular, do not compensate for the additional energy consumed from these drinks by reducing intake of other foods, resulting in increased total energy intake.⁶

Taxes have long been applied to other products, notably tobacco and alcohol, to discourage consumption. There is overwhelming evidence that increasing the rate of tax applied to tobacco raises prices, reduces consumption and saves lives.⁷ Poor diet and high body mass index are now the greatest risk factors contributing to the burden of disease in Australia, which taken together rank ahead of smoking and alcohol-related illness.⁸ Public health advocates argue that it is in the interests of society as a whole to reduce the burden that diet, obesity and associated diseases place on the health system and many individuals.⁹

2. Industry wants to be part of the solution through self-regulation, but is obliged to maximise profit

The Australian Beverages Council claims that it is making an effort to ensure it is part of the solution to obesity.¹ However, the legal obligation of Australian companies is to act in the interests of their shareholders and maximise sales and profits to the full extent permitted by law. Public health advocates argue that the beverage industry therefore has an unavoidable conflict of interest when it comes to reducing consumption of its products, and cannot be relied upon to act in the interests of population health rather than profit.¹⁰

3. Poorer people pay a larger share of SSB taxes – but also reap the greatest benefits

One of the most common arguments used to oppose SSB taxes is that they are regressive. In other words, critics claim that it is unfair to make poorer people pay a larger share of their limited income to consume these products when compared to wealthier people.¹¹

Research from Mexico¹², Chile¹³, Ecuador¹⁴ and a review of middle-income countries¹⁵ finds consumers of lower socioeconomic status are more price-sensitive towards SSBs, meaning they are more likely to modify their behaviour to purchase alternative products. An economic modelling study from Australia shows that a 20% tax on SSBs would increase annual expenditure on SSBs by just AU$35.40 per person (0.5% of expenditure on food and non-alcoholic drinks) in the lowest socioeconomic groups.¹⁶ Despite this increase in the cost of SSBs, the annual increase in SSB purchases between groups with the highest and lowest socioeconomic status was found to be relatively small (AU$3.80/capita).¹⁴

Importantly, Australians of low socioeconomic position stand to derive the greatest benefit from reduced consumption of SSBs because this group is disproportionately affected by high rates of obesity and diet-related illnesses.¹⁴ The economic modelling study showed that almost 50% of the healthcare savings generated by a 20% tax on SSBs in Australia would accrue in the most disadvantaged groups.¹⁴ Furthermore, the study found that out-of-pocket healthcare costs saved as a percentage of household expenditure were greatest among those of low socioeconomic status, reaching nearly AU$300 million for the total population over a lifetime.¹⁴

Any arguably regressive characteristics of a health levy on SSBs could be overcome by using revenue gained through the levy to fund initiatives and programs with a focus on Australians of low socioeconomic position. This could include subsidies on fresh fruit and vegetables for low-income families, or programs to improve availability of fresh produce in remote and rural areas.¹⁷

4. Has sugar consumption decreased in Australia?

A claim that sugar intake has fallen in Australia while obesity rates have continued to rise has been used to argue against a tax on SSBs.¹⁸ Australian Bureau of Statistics analyses have shown that, on average, Australians’ consumption of added and free sugars remained relatively consistent between 2019/2020 and 2020/2021, with free sugar intake higher than WHO recommendations.¹⁹ Specifically, data suggests that intake of free sugars increased during this timeframe in part because of greater electrolyte, energy and fortified drink intakes.¹⁶ The topline figures on Australians’ average consumption also mask variations within sub-groups of the population: in particular, men and those living in remote or low socioeconomic status areas remain large consumers of sugary drinks.²⁰

There is growing international evidence that consumption of added sugars, particularly from SSBs, is a major cause of excess weight gain and type 2 diabetes.^{21 22} More than half of Australians aged two years and older exceed the WHO’s recommended limits on energy from free sugars, particularly due to sugary drink intakes.^{16 18}

5. Impact on jobs and the economy

Industry groups commonly claim that taxes on SSBs will cause considerable job losses. Following the introduction of an SSB tax in Mexico in 2014, there was no decrease in employment in the beverage industry three years post-implementation and unemployment rates in the country did not increase.²³ Similarly, no impact on employment was found after implementation of the SSB tax in Chile²⁴ or the US.^{25 26 27 28} The Grattan Institute predicts that job losses would be minimal as a result of an SSB tax in Australia, as consumers would switch to other product lines, such as bottled water and artificially sweetened beverages.⁵ In line with this estimate, simulation models in the US and Brazil suggest that SSB taxes can actually increase employment.^{29 30}

The impact of an SSB tax on the Australian sugar industry would also be minimal, according to the Grattan Institute: about 85% of the sugar produced in Australia is exported, with the tax only expected to affect 0.5% of total sugar production.³¹ Overall, an SSB tax would result in more sugar being exported rather than sold domestically, especially as the demand for sugar around the world expected to increase.³¹

6. A complex problem requires a complex solution

Industry positions obesity as a complex issue in order to argue against any single solution, even when it is put forward as part of a comprehensive approach. In its submission to the 2018 Senate inquiry into the Obesity epidemic in Australia, the Australian Beverages Council stated: “The solution to the multi-factorial problem of obesity rests on the ability of stakeholders and sectors to work together in a systems approach that recognises the complexities and interactions of the issues. There is no simplistic, single nutrient or silver bullet answer.”³²

While overweight and obesity are complex conditions with multiple causes, there is a substantial association between consumption of SSBs and long-term weight gain.³³ NH Obesity is a risk factor for chronic disease including cardiovascular disease, diabetes and some cancers.³⁰ Advocates for an SSB tax in Australia agree that the measure should be introduced as part of a comprehensive plan for reducing rates of overweight and obesity.⁵

An analysis of sugary drinks, food, alcohol and gambling industry documents has shown that the concept of complexity is frequently used to undermine effective public health policies that threaten unhealthy industries’ profits.³⁴ Authors of the paper conclude that industry arguments imply the existence of a ‘complexity fallacy:’ complex problems can only be addressed by complex solutions.³² They caution that “policymakers should be aware of this so that it may be taken into account when weighing industry arguments that ‘Nothing can be done until everything is done’.”³²

The industry often argues that other interventions (e.g., exercise, education on healthy eating, voluntary regulations and prescription medication) may more effectively reduce diet-related diseases when compared to SSB taxes. However, robust analyses in the international and Australian contexts have shown that a tax on SSBs is likely to be among the most effective and cost-effective policies for obesity prevention.³⁵

Importantly, price promotions have been cited by health experts as a potential challenge to the effectiveness of SSB taxes.³⁶ One analysis of retail data found greater price promotions on taxed products after implementation of the SSB tax in Oakland, California.³³ In other words, industry use of price promotions may have weakened the impact of the tax or served to increase demand for targeted drinks.³³ To help maximize the effects of SSB taxes, it is likely to be beneficial to pair a SSB tax with policies that limit price promotions on taxed products.³³

While complementary policies are needed as part of a comprehensive approach to improving population diets, SSB taxes are likely to be an easy way to effectively reduce sugar intake and better support the health of consumers.³⁵