This book is a very short treatise on the perils of sugar consumption, and the possibilities of taxing it. The title refers to the view of classical economist, Adam Smith, that all three commodities are proper subjects of taxation. The authors agree that it being universally consumed, but not a necessity of life, makes the difference.
But whereas government appears to have had great success in taxing alcohol and tobacco consumption, it has not been willing to tax sugar as such. The book begins by making a scientific case for the deleterious effects of sugar consumption, based on statistical links to obesity, to build a case for a targeted tax. Most of the rest of the book is a review of the attempts to tax soft drinks in particular countries, and a review of the literature on the effectiveness of targeted taxes used to curb demand. As with any book based on economic theory there is a reliance on terminology, some of which is inconsistent – sometimes they refer to the ‘elasticity’ of demand, and at other times specify the price inelasticity. This is probably confusing to most potential readers.
But the economic theory is secondary to the science. An early chapter describes the role of sucrose, glucose and fructose in human digestion. The main message seems to be that what the authors term ‘added sugar’, as in the average can or bottle of Coke, immediately raises the level of intake beyond that recommended by health authorities. In New Zealand the World Health Organisation guideline has been adopted, which is 9 teaspoons for adults per day, when the average intake is apparently closer to 40. So, unless one is a professional cyclist riding hundreds of kilometres, that means no Coke.
The medical case that the authors put up may seem convincing, but also hopelessly unrealistic. To stay in the guidelines would mean cutting out virtually any treat food completely. Indeed, if the effect of added sugar is so bad, and the health impacts are so great, it would seem better to regulate rather than try to tax soft drink products. Most of the discussion is spent examining how to make a tax effective in economic terms, and create a permanent effect on consumption. But the specific parts referring to elasticity and income effects involve dependent variables, i.e. the fact is that the pattern of consumption of low income households is determined by their poverty. It would seem that just raising poor people’s household income would improve health.
This particular book would have done better to look more closely at retailing in New Zealand, rather than exhaustively review the international literature. Those that shop in supermarkets often notice the sale of 1.5 litre soft drink bottles at 99 cents, which makes it less expensive than an average imported orange or locally produced tomato. Local dairies and 4 Squares also have permanent specials of soft drink cans at $1 or $1.50, depending on the size or number purchased.
And, though the authors briefly mention the lobbying by the retail industry groups, and the political impact of this on the previous government, the profit motive is not questioned in the book. So, instead of micro-designing a new tax to target consumption, the real issue is the retail sector, the supermarket duopoly, and the fact that small dairies rely on Coca-Cola Amatil’s discounting for their survival. Since the authors don’t recommend other measures, such as removing GST from healthy food, they also put economic efficiency first.
Reviewed by Simon Boyce
Sugar, Rum and Tobacco: Taxes and Public Health in New Zealand
Mike Berridge and Lisa Marriott
Published by BWB