Introduction - Evaluating the Effects of Sugar Tax on Consumers and Firms
Beverage manufacturing and production require large amounts of sugar that most often adversely impacts human health. Soft drinks consist of a considerable amount of sugar which is a major contributor to increasing obesity. The United Kingdom's (UK) beverage industry is considered to be one of the largest in the world and holds a large customer base. It uses a huge amount of sugar for production and enhances the quality of the products. The government of the UK has introduced a sugar tax on the beverage companies that are operating in the UK. It is primarily focused on containing the risk of obesity and different health-related problems among citizens of the country. However, it has raised several concerns among people to purchase soft drinks and their wide use. This tax would be a contributor to increasing the prices of these products and create difficulties for lower-income people in the country. This essay aims to analyze every aspect of this tax and government intervention in the beverage market.
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The government of the UK introduced a sugar tax in the year 2018 that was enacted in the month of April of the same year (Institute for Government, 2022). It has aimed to reduce the sugar consumption level of its citizens and contain the obesity problems in the country. However, it led to broader government intervention in the market and often created conflicts regarding controlling measures. As opined by Véliz et al. (2019), the sugar tax created several concerns among citizens regarding individual freedom and liberty. The author added that personal liberty and freedom of selection could be overlooked through enacting the act. The act would raise several concerns among citizens and tend to lose their trust in the legislature of the country. The imposition of the tax could raise the prices of beverage commodities, which could hamper market growth and consumer perception.
Figure 1: Amount of sugar in the drinks that come under the tax slab
The above figure depicts the amount of sugar in soft drinks produced in the UK. It shows that drinks containing 8g of sugar per 100ml would be taxed at around 24 GBP (Lshtm.ac.uk, 2018). Beverages that contain sugar within the range of 5g and 8g would be taxed at 18 GBP. As stated by Scarborough et al. (2020), The UK government's imposition of the levy on the beverage industry is focused on reducing different health problems of people. The author added that the government has created different tax slabs for varying usage of sugar in soft drinks. High levy duties have been imposed on drinks that contain 8g of sugar per 100 ml. These duties have been enacted to cut down on sugar usage and counter health-related problems of citizens. It would be a major contributor to reducing the sugar consumption of people and resolving health-related issues.
Analysis and Evaluation
The government's imposition of duties on beverage products aims to reduce weight-related problems among the citizens of the UK. It has been witnessed that this tax prevents around 5,234 obesity cases within the 6-year time limit (Theguardian.com, 2023). It has dropped sugar consumption levels by 8% in the UK. As opined by Buckton et al. (2019), the sugar tax aims to reduce the sugar consumption level and prevent beverage firms from using sugar. The author added that soft drinks manufacturers would reduce the usage of sugar and avoid levy duties. However, stakeholders associated with the industry have faced several difficulties through the imposition of this tax and it created conflict in the industry. High prices often prevent consumers from buying these products, which would hamper the revenue growth of the companies in the industry. The tax rates often increase difficulties for businesses to ensure the smooth running of their operations.
As stated by Jones et al. (2021), The UK's levy on sweet-based soft drinks has encouraged less consumption of sugar and resolved health-related problems. The author added that it is one of the foremost policies that could be a significant contributor to the increasing obesity problems among people. On the contrary, Zeng (2019) argued that this tax could raise several economic problems and encourage unemployment issues. The author further stated that it could hamper the industry's production and reduce its contribution to the economy of the country. It could further disturb the supply chain resilience and create obstacles to the economic growth of the UK.
As opined by Sullivan et al. (2023), The UK enacted a sugar tax to lower the sugar consumption level and reduce the rising health problems of its citizens. The author added that since the imposition of the sugar tax, beverage firms have restructured their production facilities and avoided the mass usage of sugar. It has become a significant contributor to raising the demand for low-sugar drinks and healthier fruit drinks. In contradiction, Acton (2020), argued that sugar taxes created tax differentiation among different income groups of people. The author further stated that lower-income group people tend to purchase more substitute products at a low price, which could also raise health-related concerns among them. The taxation structure has created several financial difficulties for consumers and firms in the industry.
As opined by Blakely et al. (2020), the government's introduction of food subsidies and taxes aimed to mitigate the problem of poor eating habits among people. The author added that it often increases the price variations of beverage products and could create uncertainty in the industry. It would further create financial distress as well as an economic downfall for the companies operating in the industries. As stated by Le Bodo et al. (2019), the French government has also imposed taxes on sugar-based beverage products to address people's health-related concerns. The author added that it contributed to the huge rise in wages of workers in the industry and also had adverse impacts on the agriculture sector of the country. It has increased goods and services tax by 5.5 % in France, further raising the inflation rates in the country. In this case, policy-making and legislative decision-making also face difficulties inmanaging the taxation structure in a proper way and meeting the target. French policymakers indulged in conflicts that created complete chaos in the industry as well as the country's economic perspective.
As stated by Richardson et al. (2021), different countries have planned to impose a sugar tax on beverage products and resolve the issues of people's health. The author added that it could raise expenditures and adversely impact the lower-income regions in countries. The Australian government is planning to impose an around 20% tax on sugar-based beverage products. The research of Richardson et al. (2021) depicts that the sugar tax will have a larger impact on the socio-economic standards of people as well as raise income inequality. People from lower income groups would face several difficulties in finding substitute products. The imposition of a sugar tax is necessary to combat weight-related health issues of people. However, financial aspects need attention before the enactment of the tax regime as well as a proper framework is required to be developed.
Conclusion
In conclusion, it can be said that the essay highlighted different aspects of the sugar tax in the UK. It shows that this tax plays a crucial role in decreasing weight-related issues of people in the country. This is an effective method to address these problems as well as force firms to avoid mass usage of sugar in their products. Moreover, it also highlighted the financial concerns of this tax and its contribution to higher inflation. The essay gives a brief insight into the cases of different countries related to the imposition of the sugar tax and its influence on financial growth. It has been witnessed that lower-income groups of people have been worst affected by the sugar tax regime.
References
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Buckton, C.H., Fergie, G., Leifeld, P. and Hilton, S., 2019. A discourse network analysis of UK newspaper coverage of the “sugar tax” debate before and after the announcement of the Soft Drinks Industry Levy. BMC Public Health, 19(1), pp.1-14.https://link.springer.com/article/10.1186/s12889-019-6799-9/
Institute for Government. (2022). Sugar tax. [online] Available at: https://www.instituteforgovernment.org.uk/article/explainer/sugar-tax#:~:text=18p%20per%20litre%20on%20soft. Accessed on 13.03.2023
Jones, A., Wu, J.H. and Buse, K., 2021. UK's sugar tax hits the sweet spot. bmj, 372.https://www.bmj.com/content/372/bmj.n463.short
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Lshtm.ac.uk (2018). The UK has introduced a sugar tax, but will it work? Available from https://www.lshtm.ac.uk/research/research-action/features/uk-sugar-tax-will-it-work. Accessed on 13.03.2023
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Zeng, Z., 2019. The impact of a sugar tax on the economy. The Frontiers of Society, Science and Technology, 1(5).https://francis-press.com/uploads/papers/4YmLr0rJEquS0WGUg5WAJOzkI9gpjk2z1ixsRfyB.pdf
