Soda Health Impact, Regulation and Taxes

By pjain      Published Feb. 10, 2020, 8:35 p.m. in blog Health   

Soda Health Impact

US obesity skyrockets

US national obesity rate more than doubled among adults and tripled among children in the period from 1980 to 2010.

Obesity rates are higher in low-income communities.

“California is facing a diabetes and obesity epidemic, yet spends less than any other state on prevention.” It estimates nearly 2.5 million Californians, or almost one out of every 10 people in the state, live with diabetes and another 13 million residents have what’s considered “pre-diabetes.” - AB-1003 proposal

Soda Regulation and Taxes

Global Summary

Country Tax
USAwide none
EUWide
UK SDIL 18-24p/litre
Italy Oct'20 10c/litre

Global Lobbying efforts

The American Beverage Association has spent millions of dollars around the country in the past decade to defeat soda tax efforts or to fight warning label requirements.

US Regulation and Taxes

Statewide pre-empt local beverage/food taxes - support existing food,sugar drink lobbies

This could be seen like tobacco taxes, but unlike sin taxation, the net revenue is far smaller and food lobby is MUCH stronger.

CA - should be a sane healthy state? Wrong!

  • 2019 Statewide pre-empt local beverage/food taxes but doesn't ban statewide taxes, just prevent patchwork taxation.

    This was under a compromise reached in June 2019 between California lawmakers and the beverage industry that banned new local taxes on soda until 2031.

  • 2019 AB-1003 statewide tax on sweet drinks defeated by industry in legislature.

    “California is facing a diabetes and obesity epidemic, yet spends less than any other state on prevention.” It estimates nearly 2.5 million Californians, or almost one out of every 10 people in the state, live with diabetes and another 13 million residents have what’s considered “pre-diabetes.” - AB-1003 proposal

  • 2020 CA Doctors have introduced a 2020 ballot measure, could raise $2 billion to $3 billion by 2022-23 to fight obesity and dental disease. The proposed measure exempts diet sodas, milk and juice, as well as infant formula and medical beverages - so major loopholes are left - as drink makers already pivoted to these higher margin products.

  • AB-766 to ban sale of jumbo sodas was pulled

AZ Statewide pre-empt local beverage/food taxes

Midwest facing health cost crisis

  • MI - statewide pre-empt local beverage/food taxes

Local Counties that Enacted a soda tax

  • Berkeley CA was one of first with a soda tax as do neighboring cities like Oakland, SFO and Albany.

    • However CA legislature passed a statewide ban that preempted it - probably overriding - though Berkeley got there first - so soda tax may be still valid ??
  • NY City

States Local Counties action on sugary drink taxes

  • CT - supported a state tax in Feb 2019 - but blocked
  • Wash DC PROPOSAL would levy a 1.5c/oz excise tax on sweetened
  • Santa Fe, NM - Rejected a soda tax
  • Cook County, IL - Rejected a soda tax

EU Regulation and Taxes

  • Most of EU does not have soda taxes

  • Only nine European countries levy soda taxes at an average of €0.064 (US $0.075) per 355ml (12oz) can of soda. Considering a kiosk price of $1+ this is barely a 7% tax and unlikely to be a deterrent.

  • Interestingly, the taxes have not caught up, even though Scandinavian countries started levying an excise duty on sugary drinks decades ago. Finland’s first tax on soft drinks dates to 1940, and Norway first implemented one in 1981.

UK SDIL 18-24p/litre and Ireland

  • UK Introduced 2 years ago, SDIL is a 2-tier tax based on amount of sugar. It raised nearly $200m in half year. The bulk came directly from manufacturers.

  • Ireland has a Sugar tax soon after with similar to SDIL. However it has been more aggressive, in Jan'19 this tax extended to plant protein drinks (soya, seed, etc) and drinks with milk fats. However there is a calcium level exemption those with "fortified" CA more than 120 mg/100ml are exempt! Weird right?

  • UK Currently milk drinks (and yoghurt?) that affect kids are allowed to be sweetened, but may be next targets. However the neo-trump Boris Johnson will likely put a hold on new measures, though SDIL may not be touched.

India

  • India has a Re220b (about $3b) soft drinks industry, but with capacity utilization barely 40%. Often end users consume "micro"-size cokes - thick bottles with little content. In a hot country like India, soft drinks are a guest treat vs hot tea or coffee.
  • "Real soft drinks" ie Coke is demanded eg at lavish wedding parties, instead of local lemonade like variants.
  • Soft drink Consumption seems rising rapidly from 44 in 2016 to reach 84 bottles/head by 2021 across sodas, juices and bottled water - even if sugary sodas stagnate or decline. However this is far lower than US/Mexico at 1500/yr, Germany/EU at 1220/head and developing countries like Brazil at 500/yr.

  • Recent GST rates vary a lot 5% Sugar itself - also same for tea, coffee and food oil 12% Ayurvedic products eg Dabur, Baba Ramdev's Patanjali - a core BJP supporter 18% Lower end simpler Hair oil, soaps, toothpaste 28% Consumer packaged "fancier" shampoos, dyes, sunscreen 28% Candies, gums etc. 40% Soft drinks

Coca-Cola and PepsiCo, control the Indian Beverage Association (IBA). But they face slowing sales because of lower consumer spending on discretionary products and competition from small, regional brands selling 15-30% cheaper. There is an entire ecosystem eg “negative ripple effect” on bottlers, retailers and distributors.

  • There is very little demand for diet or low-sugar drinks.

  • While taxes reach well over 40% under GST up from 32% earlier, the prices have been held down to 10%.

  • Within confectionery, taxation will go up to 18% from 15% for candy, and to 28% from about 22% for gums. In the case of shampoo, taxes will rise to 28% under the GST regime from 23%.

China

Other Asia, South, Southeast Asia

  • Malaysia implemented a two tier soda tax July'19 similar to UKs SDIL, as it faces 50% obesity rates.

Arabia and Africa

  • The entire mideast (other than Israel) is facing a massive obesity crisis.
  • Soda drinks are particularly common - as Islam frowns on alcohol.

  • UAE is acting severely with a 50% excise tax on an entire class of sugary drinks or concentrates or powders. This is an additional product list on top of 50% tax on carbonated drinks and 100% excise tax on energy drinks.

  • However UAE excludes products containing 75% milk or baby products or special diets.

  • Pakistan has 17% excise on sugar tax. But not specifically on sugary drinks.

  • Morocco cancelled 2018's proposal for a two-tier VAT on sodas.

References


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