On the proposed South African sugar tax

As Africa Check reports in Daily Maverick, it’s not yet clear what the effects of the proposed sugar tax in South Africa will be. But it is clear that South Africa has a serious obesity problem – and that sugar is a clear causal factor for obesity.

A Mail&Guardian journalist recently approached me for comment on this (I’ll update this post with a link to the piece when it’s published), but because the M&G article will likely only quote snippets, here’s a fuller response to a few sugar tax issues.

Background issues

In most circumstances, the classical liberal position involves not being penalised for your choices, even if they are unhealthy ones, so long as you don’t harm others through those choices.

But it’s now quite clear that we are irrational choosers, and that “nudges” or “choice architecture” can help us protect ourselves from ourselves. A sugar tax is one such nudge, but before endorsing it, we’d hope to know whether it’s effective; whether it’s the best way to combat our (serious) obesity and diabetes problems; and whether there are any unintended consequences that should give us pause.

If the first two questions can be answered “yes”, and the third “no”, it may well be an acceptable violation of liberty, in that it would meet our interests overall, and in the long-term.

The evidence on the first question is promising, but inconclusive because few experiments have been run, and they have been run over short time-horizons. And even where we have seen a decline in soda consumption (17% in Mexico, with a disproportionately large decrease in low-income households), we don’t know whether sugar consumption overall has dropped, because people could independently be sweetening other drinks more, or switching to naturally sweet drinks such as fruit juices (or even to chocolate or other sweet items).

One might therefore wonder whether we should be among the trailblazers here, rather than waiting for more data to come in.

Which brings me to the second question: would a tax on sugar, rather than sweetened drinks, not target the root problem better than targeting particular examples of sweetened products would?

Of course it’s true that sugary beverages are the easiest target, and the sector that contributes most to the problem, but it’s also a sector which contains many responsible consumers, who are going to penalised (because the costs will be passed on by manufacturers and distributors) even if they continue drinking these beverages in moderation.

The underlying problem or issue here is that sugary beverages are being placed in the same category as liquor and cigarettes, where this becomes a “sin tax”, and where it places a negative moral judgment on drinking sugary beverages – and this isn’t appropriate for a large number of consumers, who would now end up cross-subsidising “irresponsible” drinkers.

Regarding unintended consequences: We also – crucially – can’t have any confidence that the funds raised through this tax will go into combating obesity and diabetes. Given that we for example know about a funding crisis in tertiary education, who would reasonably expect that the money won’t go there, rather than into the public health system?

Would a sugar tax “hit the poor hardest”?

This is another area in which unintended consequences could be an issue, but I’m not yet persuaded by the argument. It’s perhaps true that indirect taxes affect the poor disproportionately, in that a luxury in a poor household might be a bottle of soda rather than yerba mate or chai tea, but there seems little reason to think that people of whatever economic sector couldn’t switch preferences to another beverage if the sugary option became too expensive, or to think that it’s some sort of rights violation to make sugary drinks more expensive.

Are there other things we should be taxing instead?

There seem more obvious candidates for taxation – or increased taxation – if our concern is public health (rather than simply bringing more money into the fiscus, which is perhaps the real motivation here).

Taxes on tobacco products, for example, would ideally be far higher than they currently are (acknowledging that this, more than sugary drinks, seems to present an increased tax on the poor), and the same for alcohol. These are two products that have clear health risks, and which are far more difficult to “use responsibly” when compared with sugary drinks.

In general, I’d rather see income taxed at a higher level, especially at the higher end, before we entertain any additional (or increased) taxation of lifestyle choices. But, if we can be confident that the revenue raised through a sugar tax is directed at combating obesity, it does seem reasonable that those who contribute most to the public health burden (a shared expense) should contribute a higher proportion of the costs.

Also published on Medium.

  • Amy

    Unhealthy choices do – indirectly – harm others. Obese people are more likely to be diabetic, have heart problems, etc. They become a burden on our health care system which we pay for. So our money is being directed there instead of elsewhere that can benefit us more.