Sugar-coating the bitter tax pill
WHEN celebrity chef Jamie Oliver tipped a wheelbarrow full of sugar onto the stage of his 2010 TED Talk, it was to illustrate how much of the stuff an American child consumed in five years of primary school — in the daily bottle of flavoured milk served as part of school meals alone.
Oliver has campaigned for a decade to improve the quality of school meals in his home country, the UK, and took his mission to the US, where childhood obesity rates are rising rapidly.
South Africa’s Department of Health is worried about the longterm costs of obesity, hence the announcement in the budget of the first tentative steps towards imposing a tax on sugar consumption. The big problem is that it doesn’t go far enough.
The decision to target soft drinks has met resistance in some countries, but has been used successfully in Mexico to lower consumption. It has the added benefit of raising funds for the fiscus. Research shows that people consume most of their sugar via fizzy drinks. As much as 30% of the sugar consumed by children under 10 is thought to come from fizzy drinks — and that grows to as much as 40% among teenagers. It is a logical place to start, but the issue is complex.
If you levy a hefty tax on fizzy drinks, do people simply get their sugar fix elsewhere? Fruit juice, for example, contains high levels of sugar, as do flavoured waters and other drinks, like the flavoured milks highlighted by Oliver. If drinks were taxed, then someone seeking a sugar fix might simply eat half a box of chocolate biscuits to get the same short energy burst.
Taxing products based on their labelling would be a nonstarter. Without rigorous testing on every sugary product on the shelves, it would be pointless. Surely, it would be easier to tax sugar at source?
Considering how much of the stuff is added to foods such as cereals, cakes and biscuits — not to mention the concoctions that make fast food hard to resist — if the government was serious about tackling a leading cause of obesity it would get sugar manufacturers to act as its agents. This would make the tax easier to collect and have a wider effect.
In the same way that VAT is collected from retailers, a sugar tax levied on the likes of Tongaat Hulett for every kilogram sold might actually change consumption.
When Tiger Brands changed its Black Cat peanut butter recipe and added sugar, it claimed to have done so to cater for changing tastes. That’s the problem. If your rival jams more sugar into its product than you do and you start losing market share, you will counter with an extra spoon or two and find yourself locked into the equivalent of a sugar arms race.
Sugar is addictive. The more you have, the more you want. So it makes sense to tax it. If not to actually lower consumption, then at least for the government to raise the revenues it needs to deal with the long-term consequences of obesity.
Does the fuel levy mean you drive less? No. You still have to get to work. A levy on fuel means you simply pay more for every litre you burn. Does a tax on liquor shift people into a different category of alcohol consumption? If the tax on spirits affects the affordability of whisky, you may drink wine instead, for example. Does it achieve anything more than changing consumption patterns?
So if you added R1 to every can of fizzy drink sold, would it affect long-term consumption? Probably not. If sugar was taxed at source and manufacturers were provided a chance to expand profit margins by using less of the stuff, there might be a fighting chance of actually reducing the amount consumed.
The risk, of course, is that food manufacturers find a way around a tax. They could use corn syrup or artificial sweeteners, which could have other health consequences — so governments have to find a balance between extracting a tax that is worthwhile, without encouraging practices that have unintended consequences.
Whitfield is an award-winning journalist who likes sugar