Challenges, opportunities of sugar tax implementation
SUGAR is a common ingredient in our drink and food that many cannot live without.
However, excessive intake would cause many health issues such as obesity and noncommunicable diseases (NCDs).
The Malaysian government has implemented many measures to address these health issues. Among them was the introduction of a sugar tax on beverages in 2019.
The additional revenue generated from this tax would be used to support dialysis facilities and diabetes treatment.
Despite these efforts, the alarming rise in obesity and dietrelated NCDs suggests that the measures may be insufficient in effectively addressing these health issues.
Carbonated and sugarsweetened beverages (SSBs) are extremely popular among Malaysians.
Malaysia ranks as the eighthlargest consumer of sugar in the world with 55.9 per cent of Malaysians incorporate sugar into their daily diets, which is equivalent to four teaspoons of added sugar.
This level of consumption exceeds the average daily sugar intake.
Additionally, Malaysia holds the highest diabetic population in Asia. With an average of 50kg of sugar consumed per person, Malaysia outpaces both Thailand, which records 35kg and Indonesia, 20kg.
According to Khazanah Research Institute and World Population Review 2023, Malaysia had the highest obesity rate and obese population in Southeast Asia.
Moreover, the Malaysian Ministry of Health’s recent survey revealed a significant increase in health issue over the last 20 years, with 47 per cent of adults in Malaysia currently facing health problems related to obesity.
Malaysia is preparing for an economic transformation that is set to take place in the next decade. It is important to note that a weak and unhealthy young population may hinder the achievement of the vision that has already been established.
In light of the current situations, the authorities could consider the following measures to effectively manage health issues related to sugar consumption.
Firstly, sugar excise duties can be imposed on either producers or consumers.
When taxes are imposed on producers, it may impact sugar exports, while consumer taxes directly increase purchase costs. These measures are intended to decrease beverage consumption and contribute to a healthier society by reducing sugar intake.
Secondly, products with higher sugar content are given a distinct label and are subject to higher taxes compared to products with lower sugar content.
The use of a cap-and-trade model for sugar taxes has proven effective in reducing sugar consumption among Malaysians. Therefore, a conventional sugar tax may not be sufficient, but combining a sugar tax with a cap-and-trade model is suitable for regulating sugar intake in products and the overall market consumption of sugar products.
Nations facing sugar-related health issues should implement a ‘nutri-grade’ system, which quantifies the amount of added sugar in products.
Sugar taxes can then be adjusted based on the nutrigrade ratings, with higher taxes imposed on beverages or products with the highest sugar content compared to those with lower sugar content.
Next, the promotion of sugarcontaining products through media should be prohibited. The Malaysian government could consider adopting Thailand’s approach of categorising sugary beverages and implementing restrictions on the advertising of these specific drinks.
This classification encompasses six types of beverages: artificial mineral water, carbonated soft drinks, fruit and vegetable juices, coffee and tea, energy drinks, and other beverages with a significant amount of sweeteners or flavourings.
Additionally, the Malaysian government could consider implementing a lower base tax rate on sugar, in addition to a specific sugar tax. The specific sugar tax would be an additional tax imposed based on the amount of sugar included in the product.
On the other hand, the base sugar tax would be applied to all products that contain sugar. The rate for the sugar tax may vary depending on the percentage of added sugar in the beverage.
Beverages with high sugar content could potentially be subject to a higher specific sugar tax.
Another approach involves a command and control regulatory strategy. This strategy is used by governments or authorities to control and enforce compliance with specific rules, standards, or regulations.
In general, this strategy consists of outlining the regulations, enforcing them through mechanisms, and monitoring and inspecting activities.
This initiative could be much more effective if random onsite inspections of factories or market assessments were to be conducted by regulators, and sanctions to be imposed in cases where breaches had been detected and the sugar content exceeded the established benchmarks.
In conclusion, in view of efforts to combat obesity and NCDs, the sugar tax may not be seen as effective.
Malaysia remains the highest consumer of sugar and continues to experience a rise in obesity and diabetes rates.
The government needs to adopt a multifaceted and holistic approach that combines taxation, regulation, and product reformulation for better results.
The opinions expressed in this article are the author’s own and do not reflect the view of Swinburne University of Technology Sarawak Campus. Nivakan is a lecturer in accounting and business at the Faculty of Business, Design and Arts, while Ngui is a lecturer in finance and economics at the Faculty of Business, Design, and Arts. The writers are contactable via nsritharan@swinburne.edu. my and lngui@swinburne.edu. my.