What Is Sugar Tax?

What Is Sugar Tax?

Nations across the world are imposing sugar tax or soda tax on sweetened beverages to tackle the problem of diabetes type II and obesity. Let’s understand what sugar tax is and its impact.

Crux of the Matter

Sugar Tax
Sugar tax or soda tax is a tax on carbonated soft drinks, sports drinks, and energy drinks. It has been introduced with the aim to reduce the consumption of drinks with added sugar. Global companies like Coca-cola, PepsiCo, Red Bull, etc. have opposed it.

Some experts argue that it is an example of Pigouvian taxation aimed to discourage unhealthy diets and to counter the growing economic costs of obesity. In simple terms, Pigouvian tax means a tax imposed on any market activity to suppress its demand and consumption or to have a desired negative outcome.

This tax is also termed as a policy intervention to tackle the critical problem of obesity and overweight. However, sugar tax has remained a matter of public debate in many countries. Some experts argue that there are no impactful results and medical evidence to support the benefits of a sugar tax on health.

Similar To Tabacco Tax
Tobacco tax was introduced to tackle the problem of cancer caused due to Tobacco. Tobacco tax proved to be successful in many developed countries. Thus, proponents of sugar tax are hopeful that it will help to tackle diabetes. Soft drink companies are also adapting strategies that were implemented by tobacco companies such as funding research that downplays the health risks of their products, introducing alternative products, etc.


  • As per one study, sales of soda in Mexico declined 6% after the imposition of the soda tax in 2014.
  • In 2018 Australian Beverages Council announced that to cut sugar content by 10% by 2020, and by another 10% by 2025.
  • In 2017 United Arab Emirates announced a 50% tax on soft drinks and a 100% tax on energy drinks to tackle health problems
  • In 2016, a comparative study of consumption of soft drink and water before and after the imposition of the soda tax was conducted in Berkeley, San Francisco, and Oakland, a drop of 26% in soda consumption was observed in Berkeley (where sugar tax was imposed) and a 10% increase in San Francisco & Oakland (where sugar tax was not imposed), while water intake increased by 63% in Berkeley and 19% in the two neighboring cities.

Taxation Methods
Countries use different methods to impose Sugar tax. Some countries tax it on the basis of volume. For instance, France applies a tax of 0.0716 euros per litre of regular or diet soft drinks, flavored mineral water, and fruit juices with added sugar. Whereas some countries tax it on the basis of sugar content. For instance, in Britain drinks with total sugar content above 5g per 100 milliliters are taxed at 18 pence per litre and drinks above 8g per 100 milliliters at 24 pence per litre (100 pence = 1 pound).

Did you know that consumption of carbonated drinks in US and some developing countries has been declining over some years, whereas in developing countries its growth is giving positive signs? What could be the reasons? Go read this data-studded piece to understand what soft industry looks like: A Look At Soft Drinks Industry

  • Costa Coffee is the second largest coffeehouse chain in the world and the largest in the UK. Coca-Cola Company acquired Costa Coffee in 2019 for $5.1 billion.
  • Coca-Cola sponsored the 1928 Summer Olympics and has subsequently remained a sponsor to the current time. Coca-Cola Olympic City was an 8-acre plaza in downtown Atlanta, Georgia, built in concurrence with the 1996 Centennial Olympic Games in Atlanta.
  • Campa Cola is a soft drink brand in India. It was a market leader in the Indian soft drink market in the 1970s and 80s in most regions of India until the advent of the foreign players Pepsi and Coca-Cola. Campa Cola was created by the Pure Drinks Group in the 1970s.