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The Sugar Tax: What It Really Means

At their most fundamental level, taxes are intended to raise money and cut costs for the government by changing consumer behaviour. Activities that the government wants to discourage, such as drinking and smoking, are taxed heavily, while activities that they want to encourage, such as buying from within your own country or driving an electric car, are taxed at a reduced rate, or given exemptions.

In April 2018, the UK government introduced a sugar tax on soft drinks. The tax works by applying a charge to soft drinks that contain a certain amount of sugar per litre: drinks with 8g of sugar for every 100ml rose in price by 24p per litre; drinks with 5-8g per litre increased by 18p; and drinks with no added sugar, such as fruit juice, or a high quantity of milk, such as chocolate milk, were left unchanged.

By November of that same year, the government had taken in an additional £150 million for public health funds, while at the same time, manufacturers began to reduce the amount of sugar in their products. The end result is that consumers purchase fewer soft drinks, those they do buy are healthier, and the government has more money to direct towards tackling problems such as obesity and diabetes.

The British government had proposed a similar tax on saturated fats way back in 2011, although nothing ever came of that. However, there has been a similar tax proposed more recently, with a study by Oxford University published in November claiming that a “meat tax” could save up to 6,000 lives and £700 million a year in the UK alone. This would be achieved by applying a 14% tax on red meat, and a 79% tax on processed meat, which would ultimately lower the prevalence of conditions such as Type 2 diabetes, stroke, obesity, and coronary artery disease.

As you may remember, Ireland introduced its own sugar tax on soft drinks in 2018 as well, which involves a charge of 20c for a litre of soft drink with 5-8 grams of sugar per every 100ml, and 30c for those over 8g. In terms of the products we consume and the effects they have on our bodies, the Irish and UK markets are almost identical, so you can expect our government to closely monitor the developments across the water, and to follow suit in some way once more information is available.

Of course, no aspect of economics is perfectly predictable. The British government has already revised its initial estimates for annual tax revenue on soft drinks, bringing the number down from £500 million to £240 million after producers reduced the amount of sugar in their drinks. But we can safely assume that this taxes will impact consumer behaviour, and ultimately public health. This, combined with other factors such as the effect that producing red meat has on climate change, means you should expect to see similar measures introduced here in the next few years.