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Prevention: Tax and pricing

Case for a tax on sugar-sweetened beverages (SSBs) in Australia

Last updated 15-11-2024

A tax on sugar-sweetened beverages (SSBs) is globally recommended as part of a policy suite to address unhealthy diets. SSB taxes have been shown to reduce consumption of SSBs and encourage manufacturers to reformulate drinks to reduce sugar content. Funds from these taxes can also be used to further support community programs to improve population health, particularly in low-income areas.

Key Evidence

01

In 2022–2023, about 12% of Australians’ daily energy intake came from free sugars. This is higher than the World Health Organization (WHO) recommendations of less than 10% per day. Most of these sugars came from discretionary foods, such as SSBs. Australians are high per-capita consumers of SSBs, particularly men and youth aged 18–24 years. In 2022, daily consumers drank an average of nearly 3 cups of SSBs per day.

02

Over 50 countries have introduced SSB taxes. Robust evidence has confirmed a drop in SSB consumption following the introduction of SSB taxes, including in the UK (2018), Mexico (2014), South Africa (2018), Chile (2014) and various US jurisdictions (e.g. Philadelphia [2017], Boulder [2017], Berkeley [2015]).

03

Over 20 key health and community groups in Australia have called for an SSB tax. Public support for this policy is high, with support above 60%. The level of support for an SSB tax increases to 77% if the revenue raised is used to fund health promotion activities, such as obesity prevention programs.

Sugar-sweetened beverages (SSBs) are drinks with added caloric sweeteners, or 'free sugars' (e.g. sucrose, high-fructose corn syrup or fruit juice concentrate) and includes soft drinks, sports and energy drinks, fruit drinks, vitamin waters, sweetened mineral waters and cordials. These beverages contribute no valuable nutrients to consumers’ diets but deliver large quantities of sugar – for example, a single can of Coke contains 40g of sugar (approximately 10 teaspoons).1 SSBs are an easy-to-define category of products that are energy dense and nutrient poor, and can be readily substituted for healthier options (such as water).2

A tax on SSBs

As part of comprehensive approach to improve population diets and address obesity, SSB taxes aim to reduce Australia's burden of chronic disease. The primary motivation for taxing SSBs is to decrease their purchase and consumption. Taxes can also encourage beverage manufacturers to reformulate their products to reduce sugar content; educate consumers that these drinks are concerning for public health; and raise revenue that can be used for health initiatives.3 It should be noted that the introduction of Australia's Goods and Services Tax (GST) in 2000 reduced the sales tax on soft drinks from the previous 22% to 10%.4

Free sugar consumption in Australia

Free sugars are sugars added to foods by manufacturers or consumers, as well as those naturally present in honey, syrups and fruit juices. The WHO recommends limiting energy from free sugars to less than 10% of daily energy intake (around 12 teaspoons) and 5% for optimum health outcomes. Australian Health Survey data showed that more than half of Australians aged two years and older exceeded the recommended limits on energy from free sugars in 2011–12.5 Between 2022 and 2023, consumption of free sugars was about 12% of daily energy intake in Australia (nearly 70g per day), mostly from added (not naturally occurring) sugar. Nearly 90% of this free sugar intake was from discretionary foods, with soft drinks, as well as fruit and vegetable juices and drinks, among the top food groups contributing to free sugar intakes.5

Australians are high per-capita consumers of SSBs, and estimates from 2020–2021 suggest that intake is highest among men and youth aged 18–24 years.6 Daily consumers aged 18 years and over drank an average of nearly 3 metric cups of SSBs per day during this timeframe, with 8.5% of men and 4.5% of women consuming SSBs daily.6

Health impacts of SSBs

Evidence shows that regular consumption of SSBs is associated with increased energy intake, long-term weight gain and obesity.7 The association between SSBs and weight gain appears to be linked to a reduced feeling of fullness when sugars are consumed in a liquid form, as well as an increased feeling of hunger.8 9 Furthermore, consumers do not compensate for the additional energy from SSB intake by reducing consumption of other foods.10 At a young age, SSB consumption can also enhance preferences for sweet food and drinks, and displace more nutritious beverages, such as milk. In turn, obesity can lead to increased risk of type 2 diabetes and heart disease, alter bone health and reproduction, and increase the risk of certain cancers.11 Additionally, free sugar intake, particularly from SSBs, is a primary contributor to dental caries, which can result in pain, tooth loss, and impaired chewing abilities,12 13 ultimately affecting future food decisions and overall well-being.

Impact of taxes on SSBs

Evidence shows that vulnerable populations, such as young people, low-income consumers and those most at risk of obesity, are most responsive to changes in the relative prices of food and beverages.14

As of 2024, more than 50 countries have introduced a tax on SSBs with robust evidence from countries showing that taxes have been successful in reducing consumption, including in the UK,15 Mexico,1617 Portugal,18 Chile19 and some US regions.2021222324 Evidence also shows that SSB taxes have encouraged industry reformulation of SSBs, for example in the UK following the introduction of a tiered volumetric tax in 2018.2526

In turn, reduced consumption of SSBs is significantly associated with weight loss.27 Evidence continues to build about the scale of health benefits that will flow from SSB taxes due to reduced purchase and consumption of these drinks. Modelling studies have predicted large reductions in cases of cardiovascular disease, stroke, diabetes and some cancers.282930

See Countries that have taxes on sugar-sweetened beverages (SSBs) for more details and analysis on the impact of SSB taxes in other countries.

Potential benefits of an Australian tax on SSBs

Australian modelling studies predict that a tax would reduce consumption of SSBs and have a positive impact on Australians’ health, while raising significant government revenue.

A modelling study from the Grattan Institute estimated the consequences of a tiered tax in Australia on health and health care expenditure (40 cents/litre on drinks with 5–8g of sugar per 100ml and 60 cents/litre on drinks with >8g of sugar per 100ml).31 The results showed an average 24% decline in the volume of SSBs consumed, and a decline in sugar consumption from SSBs by about 15%.31 The study concluded that there would be sustained reductions in the incidence of type 2 diabetes, dental cavities, and premature deaths.31

Similarly, a study modelling the impact of a 20% tax on SSBs found that nearly 1,600 more Australians would be alive in 25 years, with millions of dollars saved in healthcare costs, and that the tax could generate more than $400 million (AUD) annually.32

Over a 25-year period, there could be:

  • 16,000 fewer cases of type 2 diabetes
  • 4,400 fewer cases of heart disease
  • 1,100 fewer cases of stroke.

A 20% tax on SSBs in Australia was also predicted to be highly cost-effective in a modelling study performed by a collaboration of researchers at Deakin University, The University of Queensland and The George Institute for Global Health.26 When compared to 15 other potential interventions for preventing obesity, a 20% SSB tax was the second most cost effective. The total cost savings of such an intervention were estimated to be $1.7 billion, with a gain of 175,300 HALY (health-adjusted life years). An SSB tax was also predicted to have a positive impact on the equity of health outcomes, with higher health gains in lower socioeconomic groups.26 Likewise, another economic modelling study showed that almost 50% of the healthcare savings generated by a 20% SSB tax in Australia would accrue in the most disadvantaged groups.25

After modelling the impacts on sugar consumption and government revenue, the Australian Medical Association (AMA) strongly recommended an SSB tax indexed to the consumer price index that increases the retail price by 20%.32 The study predicted that such a tax would lead to a 12% to 18% reduction in sugar consumption from soft drinks and raise annual government revenue from $749 million to $814 million. The AMA’s modelling also predicted that if no action was taken to halt the ongoing obesity crisis, the direct healthcare costs of obesity to taxpayers between 2021 and 2025 would be a further $29.5 billion.32

Support for Australian tax on SSBs

National surveys conducted between 2017 and 2018 showed that the majority of Australians supported a tax on sugary drinks, particularly if the proceeds were used to fund health initiatives.33343536 In one survey, public support for a tax increased from 60% to 77% when revenue funded obesity prevention.33

The House of Representatives Standing Committee on Health, Aged Care and Sport recommended an SSB tax based on sugar levels in its report ‘The State of Diabetes Mellitus in Australia in 2024.’37 The Committee’s recommendation, which garnered majority support from its members, was based on evidence that SSBs are a major source of added sugars and can lead to obesity and related conditions, including type 2 diabetes.37 Importantly, the Committee concluded that the impacts of obesity and diabetes are concerning across all age groups and communities, particularly among those of Indigenous and Pacific Islander heritage, and that early action with a multipronged approach (e.g. an SSB tax, marketing limits on unhealthy foods, and clearer food labelling) is needed to limit the significant burden of these conditions on the health system.37

This is not the first time a government committee have recommended an SSB tax. In 2018, the Select Committee into the Obesity Epidemic in Australia also recommended an SSB tax in its final report. Among 22 recommendations, they stated that the Australian Government should introduce a tax on SSBs, with the objectives of reducing purchases and consumption, while accelerating the reformulation of products to improve public health. The committee predicted that such a tax would also convey the message that the Australian Government is committed to discouraging SSB intakes.38

The Food Policy Index, a collaborative initiative which assesses Australian governments on their obesity prevention policies, consistently recommends a tax on SSBs as a policy priority.39 40

Numerous organisations also support an Australian tax on SSBs, including:

  • Australian Chronic Disease Prevention Alliance41
  • Australian Dental Association42
  • Australian Healthcare and Hospitals Association43
  • Australian Medical Association44
  • Australian and New Zealand Obesity Society45
  • Baker Heart and Diabetes Institute45
  • Cancer Council Australia41
  • Committee of Presidents of Medical Colleges46
  • Consumers Health Forum of Australia45
  • Dental Hygienists Association of Australia47
  • Diabetes Australia48
  • Food for Health Alliance (formerly Obesity Policy Coalition)
  • Grattan Institute49
  • Heart Foundation41
  • Kidney Health Australia41
  • Menzies School of Health Research45
  • National Rural Health Alliance50
  • Nutrition Australia45
  • Obesity Australia45
  • Parents’ Voice45
  • Public Health Association of Australia45
  • Royal Australian College of General Practitioners (broadly supportive)4651
  • Royal Australasian College of Physicians52
  • Stroke Foundation41
  • YMCA45

References

1. Obesity Policy Coalition. Policy brief: A comprehensive policy program to reduce consumption of sugar-sweetened beverages in Australia. Melbourne, Australia 2018. Available from: http://www.opc.org.au/what-we-do/pricing-measures
2. World Health Organization Regional Office for Europe. Using price policies to promote healthier diets. Copenhagen, Denmark 2015. Available from: https://iris.who.int/bitstream/
3. Obesity Policy Coalition. Policy brief: The case for a health levy on sugar-sweetened beverages Melbourne, Australia 2018. Available from: http://www.opc.org.au/what-we-do/tipping-the-scales
4. Kenny P. The GST Food Exemption. Journal of Australian Taxation, 2000. Available from: http://classic.austlii.edu.au/au/journals
5. Australian Bureau of Statistics. Apparent Consumption of Selected Foodstuffs, Australia 2020-21. 2022; Available from: https://www.abs.gov.au/statistics/health/health-conditions-and-risks/.
6. Australian Institute of Health and Welfare. Diet. 2024. Available from: https://www.aihw.gov.au/report...
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8. National Health and Medical Research Council. Australian Dietary Guidelines. Canberra, Australia 2013. Available from: https://www.nhmrc.gov.au/about-us/publications/australian-dietary-guidelines
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11. Australian Institute of Health and Welfare. Overweight and obesity. Australia 2024. Available from: https://www.aihw.gov.au/reports/overweight-obesity/
12. Nguyen TM, Tonmukayakul U, Khanh-Dao Le L, Singh A, Lal A, Ananthapavan J, Calache H, Mihalopoulos C. Modeled health economic and equity impact on dental caries and health outcomes from a 20% sugar sweetened beverages tax in Australia. Health Economics. 2023 Nov;32(11):2568-2582. Available from: https://pmc.ncbi.nlm.nih.gov/articles/PMC10946924/
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18. Goiana-da-Silva F, Cruz ESD, Gregório MJ, Miraldo M, Darzi A, et al. The future of the sweetened beverages tax in Portugal. Lancet Public Health, 2018; 3(12):e562. Available from: https://pubmed.ncbi.nlm.nih.gov/30522681/
19. Nakamura R, Mirelman AJ, Cuadrado C, Silva-Illanes N, Dunstan J, et al. Evaluating the 2014 sugar-sweetened beverage tax in Chile: An observational study in urban areas. PLoS Medicine, 2018; 15(7):e1002596. Available from: https://pubmed.ncbi.nlm.nih.gov/29969456/
20. Wright A, Smith KE, and Hellowell M. Policy lessons from health taxes: a systematic review of empirical studies. BMC Public Health, 2017; 17:583.
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23. Lee MM, Falbe J, Schillinger D, Basu S, McCulloch CE, et al. Sugar-Sweetened Beverage Consumption 3 Years After the Berkeley, California, Sugar-Sweetened Beverage Tax. American Journal of Public Health, 2019; 109(4):637-9. Available from: https://pubmed.ncbi.nlm.nih.gov/30789776/
24. Cawley J, Frisvold D, Hill A, and Jones D. The impact of the Philadelphia beverage tax on purchases and consumption by adults and children. Journal of Health Economics, 2019; 67:102225. Available from: https://pubmed.ncbi.nlm.nih.gov/31476602/
25. Lal A, Mantilla-Herrera AM, Veerman L, Backholer K, Sacks G, et al. Modelled health benefits of a sugar-sweetened beverage tax across different socioeconomic groups in Australia: A cost-effectiveness and equity analysis. PLoS Medicine, 2017; 14(6):e1002326. Available from: https://pubmed.ncbi.nlm.nih.gov/28654688/
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29. Basto-Abreu A, Barrientos-Gutiérrez T, Vidaña-Pérez D, Colchero MA, Hernández FM, et al. Cost-Effectiveness Of The Sugar-Sweetened Beverage Excise Tax In Mexico. Health Aff (Millwood), 2019; 38(11):1824-31. Available from: https://pubmed.ncbi.nlm.nih.gov/31682510/
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