DON’T SU­GAR-COAT THE TRUTH, THIS TAX IS BAD NEWS

Sowetan - - OPINION & ANALYSIS - Jas­son Ur­bach Ur­bach is a di­rec­tor of the Free Mar­ket Foun­da­tion

THE im­po­si­tion of a tax on sug­ar­sweet­ened bev­er­ages was de­bated at a joint meet­ing of par­lia­ment’s health and fi­nance com­mit­tees a week ago.

Mean­while, the ex­ec­u­tive board of the World Health Or­gan­i­sa­tion (WHO) de­cided not to en­dorse rec­om­men­da­tions to im­pose a soft drinks tax on mem­ber states un­til a tech­ni­cal re­view of the avail­able stud­ies and doc­u­men­ta­tion has been con­ducted.

Per­haps the South African pro­po­nents of a su­gar tax should fol­low suit and use their time to learn more from real world ex­am­ples. The Danish gov­ern­ment elim­i­nated a tax on soft drinks on Jan­uary 1 2014, one year af­ter scrap­ping a tax on sat­u­rated fat and a pro­posed tax on sug­ary prod­ucts.

It was es­ti­mated that more than half of the rev­enue raised by the tax was lost to il­le­gal and cross­bor­der sales. In 2012, the Danish tax min­istry stated, “the sug­ges­tions to tax foods for pub­lic health rea­sons are mis­guided at best and may be counter-pro­duc­tive at worst,” and that the taxes “can be­come ex­pen­sive li­a­bil­i­ties for the busi­nesses forced to be­come tax col­lec­tors on the gov­ern­ment’s be­half”.

The Danish gov­ern­ment is op­posed to these taxes be­cause of the high ad­min­is­tra­tive costs, job losses and the greater im­pact in­creased con­sumer prices have on low-in­come house­holds.

Ice­land also dis­con­tin­ued a tax on goods with su­gar and other sweet­en­ers. The tax, im­posed per litre for bev­er­ages and per kilo­gram for foods, was abol­ished in 2015 by the Ice­landic trea­sury to ben­e­fit house­holds and sim­plify the tax sys­tem.

In sev­eral coun­tries, tax­ing su­gar-sweet­ened bev­er­ages (SSB) or food con­sid­ered un­healthy has been con­sid­ered, only to be re­jected af­ter pub­lic de­bate. For ex­am­ple, Romania con­sid­ered fast food and SSB taxes in 2010 and 2011, but aban­doned these ini­tia­tives af­ter con­cerns were voiced about the dif­fi­culty of im­ple­ment­ing these taxes and in­dus­try warn­ings about po­ten­tial job losses. New Zealand is the lat­est to an­nounce that a su­gar tax does not work.

A su­gar tax will not re­sult in any per­cep­ti­ble dif­fer­ence to obe­sity rates. Con­sumers in South Africa, like else­where, will sim­ply switch to al­ter­na­tive prod­ucts such as fruit juice, sweets, cakes, and bis­cuits. And pro­duc­ers will switch to sweeter al­ter­na­tives such as non­nu­tri­tive ar­ti­fi­cial sweet­en­ers.

No doubt, in time, our self­ap­pointed health over­lords will just start tax­ing these other foods in an ever-widen­ing tax net and an ev­er­in­creas­ing cost of liv­ing.

This kind of tax is re­gres­sive as it will force the poor to pay a larger pro­por­tion of their in­come than the wealthy to­wards rais­ing new gov­ern­ment rev­enues. The tax will also pun­ish those who are not obese. To the ex­tent that such a “sin tax” will raise rev­enue for the state, it will be at the con­sumer’s ex­pense of do­ing without what­ever else they might have spent their money on, whether es­sen­tial or just a lux­ury.

There is no way at all of know­ing what that might have been. The ap­petite of of­fi­cials for more tax and con­trol is ar­guably un­health­ier, eth­i­cally and phys­i­o­log­i­cally, than the con­duct of con­sumers of these bev­er­ages and other prod­ucts that may be deemed sin­ful.

Pol­icy-mak­ers should gen­er­ate suf­fi­cient, high-qual­ity ev­i­dence be­fore im­ple­ment­ing a pol­icy and have plans in place to mea­sure the ef­fec­tive­ness of a pol­icy once in­sti­tuted.

“Sin taxes” to con­trol pri­vate health prob­lems can lead gov­ern­ment down a slip­pery slope. Where will the line be drawn? What next, will seden­tary peo­ple be taxed for not ex­er­cis­ing?

The gov­ern­ment can­not con­trol all be­hav­iour deemed to be a health risk for in­di­vid­u­als. At­tempt­ing to do so will have un­in­tended con­se­quences and cre­ate high reg­u­la­tory costs. So­ci­ety will be worse off with less con­sumer free­dom, a heav­ier tax and reg­u­la­tory bur­den, and wider in­come in­equal­ity.

Bet­ter health out­comes can only be achieved by mak­ing re­li­able in­for­ma­tion widely and eas­ily avail­able and al­low­ing peo­ple to take charge of their own lives.

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