[Open Forum] A Sugar Tax Disguised as “Promoting Public Health” Is a Tax Hike

The controversy over a “sugar tax” has come under scrutiny. The idea is to impose a health levy on products containing sugar, on the grounds that excessive sugar consumption is a major cause of obesity. The stated intention is to improve people’s eating habits and promote public health.

Given that 36.6% of Korean adults are classified as obese, and considering the economic losses caused by this, including medical expenses, policy proposals aimed at reducing sugar consumption are meaningful.

However, the beverage industry and consumers are strongly opposed, arguing that the sugar tax is nothing more than a price-hiking policy. Experts also believe that while government-level efforts to reduce the public’s sugar intake are necessary, simply raising prices is unlikely to produce long-term results.

If a sugar tax is introduced, overall beverage prices will rise. With the tax in place, production costs for a 250ml drink would increase by about 27 won. Since the factory price would rise by even more, consumer prices would inevitably go up. In addition, consumers have already grown accustomed to the sweet taste of beverages over a long period of time, making it difficult to change the ratio of ingredients, which would lead directly to higher costs. Ultimately, the sugar tax could increase the burden on consumers and even provoke resentment toward the beverage industry itself.

An even bigger problem is that sugar is included in almost all food categories, including dairy products and baked goods. Of course, discussion of the sugar tax is still currently limited to “beverages,” but once implemented, it is highly likely to expand to other food categories. Taxing beverages, baked goods, dairy products, processed foods, and other items that people routinely buy and consume could instead produce the opposite effect of increasing the burden on consumers, especially low-income households.

Advanced countries overseas have also introduced sugar taxes, but the side effects were significant. In 2018, Norway raised the tax on candy, chocolate, and similar products by as much as 83% compared with the previous year, and the following year sugar consumption fell by 27% compared with 10 years earlier. However, unexpected side effects also emerged. As higher sugar taxes pushed up candy prices, more people began crossing the border to shop in Sweden. Denmark also introduced a similar fat tax, but eventually repealed it as the burden on low-income groups increased.

If the purpose of introducing a sugar tax is to improve public health rather than secure tax revenue, there are many other options. To reduce obesity and contribute to economic growth, efforts to improve dietary habits and encourage exercise may be far better than a sugar tax. This is because exercise can burn a sufficient amount of calories. As public interest in dieting and healthy physiques has been rising recently, fostering a social atmosphere that encourages exercise could improve public health while also promoting job creation and growth in the sports sector. Companies can also consider substitutes. In addition, strengthening nutrition labeling or encouraging retailers to gradually reduce sugar consumption through product displays and sales methods that take nutritional content into account could also be considered.

A sugar tax could become a policy that only further increases the public’s burden in an already harsh world. Nominally, the government is pushing for the introduction of a sugar tax for the sake of public health, but in reality it could lead only to a greater burden on the people. Once the sugar tax is imposed, businesses will not absorb the burden entirely themselves; instead, they will raise product prices and pass the burden on to consumers.

Strictly speaking, the sugar tax is said to be a health levy rather than a tax, but in substance it should be viewed as a tax increase. Since other alternatives exist that could promote both public health and economic growth, insisting on pushing ahead with a sugar tax can only lead people to think that the government’s true objective is ultimately taxation. The government should listen to the voices of the people and make a wise decision.

Jubi Kim, Intern Researcher, Center for Free Enterprise (CFE)

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Original title: [자유발언대] '국민건강 증진 탈' 쓴 설탕세는 증세다

Author: Ju-bi Kim

Date: 2021-04-16

Source: https://www.cfe.org/bbs/bbsDetail.php?cid=free_opinion&pn=11&idx=23628