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

The Australian beverage industry is strongly opposed to the introduction of a tax on sugar-sweetened beverages. Opposition is led by the Australian Beverages Council, which is the peak body for the non-alcoholic beverages industry. In May 2018, the council announced that its members would reduce sugar across the industry by an average of 20% by 2020. 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”.¹ Health groups were sceptical about the announcement, which they viewed as an attempt to stave off a tax on sugary drinks in Australia.² 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.² Baseline data for the pledge dates back to January 2016¹ and manufacturers’ participation in the scheme is voluntary.³

The World Health Organization 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 a sugar-sweetened beverage (SSB) tax, and responses from advocates for such a tax, are outlined below.

1. Individual responsibility – but costs are borne by government

The industry argument that individuals are responsible for adopting healthier lifestyles, and governments should not seek to interfere with personal choice by seeking to influence decisions about what to buy and eat, can be considered in light of the significant obesity-related costs borne by governments. These include health and welfare costs, foregone tax revenue and reduced productivity. The Grattan Institute concludes that these third-party costs justify a sugar-sweetened beverage (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 association and dose-response relationship between SSB consumption and long-term weight gain and risk of type 2 diabetes. Research suggests that soft drink consumers, in particular, do not compensate for the additional energy from consumption of SSBs by reducing consumption of other foods, resulting in increased total energy intake. SSBs can also stimulate appetite.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.⁷⁸ 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.⁹ 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.⁶

2. Industry wants to be part of the solution – but is obliged to maximise profit

The Australian Beverages Council claims that it is making a strong effort to ensure it is part of the solution to obesity.¹ The legal obligation of Australian companies, however, 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.⁶

3. Poorer people pay a larger share of sugar-sweetened beverage taxes – but also reap the greatest benefits

One of the most common arguments used to oppose taxes on sugar-sweetened beverages is that such taxes are regressive, and it is unfair to make poorer people pay a larger share of their limited incomes to consume these products, when compared to wealthier people.⁸ It is important to recognise, however, that 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. They are high consumers of SSBs and are also sensitive to price so make the greatest change to consumption and stand to gain the greatest health benefits.¹⁰

Research from Mexico,¹¹ Chile,¹² Ecuador¹³ and a review of middle-income countries¹⁴ finds consumers of lower socio-economic status are more price-sensitive towards sugar-sweetened beverages, meaning they are more likely to modify their behaviour to purchase alternative products. An economic modelling study has shown that almost 50% of the health care savings generated by a 20% tax on SSBs in Australia would accrue in the most disadvantaged groups.¹⁰

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.⁶

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 sugar-sweetened beverages (SSBs).¹⁵ Australian Bureau of Statistics analyses have shown that, on average, Australians’ consumption of added sugars¹⁶ and sweetened beverages¹⁷ decreased between 1995 and 2011–12; however limitations in the data make side-by-side comparisons problematic. The topline figures on Australians’ average consumption also mask variations within sub-groups of the population. In particular, the ABS datasets show that teenage boys remain large consumers of sugary drinks. Industry data shows that while sales of soft drinks may be falling, sales of sugary drinks including energy drinks, iced teas and sports drinks are on the rise.¹⁸

There is growing international evidence that consumption of added sugars, particularly from SSBs, are a major cause of excess weight gain and type 2 diabetes.¹⁹²⁰More than half of Australians aged two years and older exceed the World Health Organization’s recommended limits on energy from free sugars and much of this free sugar comes from sugary drinks.

5. Impact on jobs and the economy

Another common claim made by industry is that taxes on sugar-sweetened beverages 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-policy implementation and unemployment rates in the country did not increase.²¹ The Grattan Institute predicts that job losses would be minimal as a result of an SSB tax in Australia. The reduction in total demand for beverages produced by Australian manufacturers would be minimal, because consumers would switch to other product lines such as bottled water and artificially sweetened beverages.⁵

The impact of an SSB tax on the Australian sugar industry would also be minimal, according to the Grattan Institute. About 75-80 per cent of the sugar produced by the Australian sugar industry is exported. The Grattan Institute concluded that an SSB tax would result in slightly more sugar being exported rather than sold domestically, with minimal impact on prices.⁵

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.”²²

While overweight and obesity are complex conditions with multiple causes, there is a substantial association between consumption of sugar-sweetened beverages (SSBs) and long-term weight gain.²³ Obesity is a risk factor for chronic disease including cardiovascular disease, diabetes and some cancers.²³ 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.²⁴

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.²⁵ Authors of the paper conclude that industry arguments imply the existence of a ‘complexity fallacy’, that complex problems can only be addressed by complex solutions. They caution: “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’.²⁵