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Newfoundland and Labrador first province to impose a sugar tax to combat obesity and diabetes. Will it work?

Newfoundland and Labrador is the first Canadian province to join the international beverage sugar-tax club. To combat obesity and diabetes, more than 50 countries have imposed beverage sugar taxes at municipal, state/provincial or national levels.

The World Health Organization, Diabetes Canada, Heart and Stroke Foundation of Canada and the Canadian Paediatric Association endorse sugar taxes.

Diabetes is a “growing and silent epidemic” that impacts 11.7 million Canadians and costs the health-care system almost $50 million a day, according to Diabetes Canada.

About a quarter of Canadian adults, and one in 10 children, are obese – and the numbers are rising. Obesity is a strong risk factor for diabetes, high blood pressure, heart disease and some cancers.

It is not debatable that rising diabetes and obesity rates have negative health effects.

Neither is it debatable that sugar taxes raise cash for governments.

However, it is debatable whether sugar taxes influence shoppers’ choices in the grocery aisles. And even if they do, is this enough to change obesity and diabetes trends?

A Nanos poll conducted for Diabetes Canada in 2017 showed that about 90 per cent of Canadians surveyed said[JR1]  there is too much sugar in pop and other beverages and that people drink too many high-sugar drinks. About two-thirds supported imposing a sugar tax on beverage manufacturers.

However, half of those polled said sugar taxes would not result in fewer sugary drinks being consumed. Despite this, about two-thirds still supported sugar taxes if their proceeds were specifically used for health-care services.

Newfoundland and Labrador became the first Canadian province to impose a sugar tax when it launched its Rethink Your Drink campaign in August 2022. A “sugar sweetened beverage tax” of 20 cents per litre took effect Sept. 1, 2022. The tax is in addition to the provincial sales tax and is levied on a drink’s volume, not the amount of sugar it contains.

The tax is imposed on store owners when they buy products at the wholesale level. Some retailers may choose to “eat the tax” and not increase the price of sugary beverages, making the tax invisible to shoppers. At those stores, diet and regular pop may be the same price.

The sugar tax applies to a wide variety of beverages as well as to concentrated frozen juices, syrups and flavoured powders used to make beverages.

N.L.’s government said that revenue from its sugar tax could help fund the province’s “prenatal infant nutrition supplement, school breakfast and lunch programs, and the physical activity tax credit.” However, as sugar taxes are considered to be general revenue, the N.L. government can spend the money as it sees fit.

The province’s sugar-tax revenues are expected to reach $9 million per year.

The province’s sugar-tax revenues are expected to reach $9 million per year and so far are on pace to generate the expected amount, according to the N.L. Department of Finance.

It is too early to tell if the N.L. sugar tax will change shoppers’ beverage choices at the grocery store, according to Jim Cormier, director of Government Relations (Atlantic) at the Retail Council for Canada, and Eric Schmidt, senior manager of communications and public affairs at the Canadian Beverage Association.

The N.L. government said it is using market surveys to assess the impact on consumers’ sugary beverage shopping habits. It conducted one before implementing the sugar tax and said it will repeat the survey on a yet-to-be determined basis.

Based on international examples, it is difficult to predict if N.L.’s sugar tax will make people healthier.

Evan Blecher, a researcher with the American Cancer Society, argues that similar taxes, also called “sin” taxes, on tobacco and alcohol are associated with reduced smoking and drinking so the same should hold true for sugar taxes.

However, teasing out what per cent of obesity or diabetes is related to high-sugar drinks versus other factors such as physical activity, diet and genetics is very difficult – if not impossible.

Compare this to the link between smoking and lung cancer; it has been proven that smoking causes about 90 per cent of all lung cancers. If smoking rates are reduced, lung-cancer rates go down, albeit with a lag of between 15 to 20 years.

The Obesity Evidence Hub claims that, in specific countries, sugar taxes have lowered sugar consumption, reduced the amount of sugar in drinks and that the number of countries imposing sugar taxes is growing. Mexico is cited as an example in which an 11 per cent sugar tax resulted in a 37 per cent reduction in sales of sugary drinks. The Obesity Evidence Hub claims that would result in more than 200,000 fewer cases of obesity.

The problem with the Mexico example is that two years after its sugar tax was imposed, the sale of sugary pop drinks actually went back up. The effect of sugar taxes on consumers in Belgium and France also diminished within a few years.

The bigger problem is that every country administers sugar taxes in different ways, making it nearly impossible to compare the impacts among them. For example, some countries tax at the wholesale level and some at the retail level; some countries tax the volume of the beverage and others the amount of sugar contained, and some tax at higher rates depending on the sugar content.

For example, a 2021 British Medical Journal study reported an overall reduction in beverage sugar consumption, roughly equaling one fewer can of regular pop per person every week, in the United Kingdom linked to its sugar taxes. However, the U.K. taxes sugar content, not volume, which means the more sugar in the beverage the more expensive it is.

Given that N.L. shoppers may see no price difference between a can of regular pop versus diet pop, its sugar tax is unlikely to change consumer behaviour beyond already pre-tax, declining trends in sugary drink consumption.

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Authors

Sandor J. Demeter

Contributor

Dr. Sandor Demeter is a Nuclear Medicine and Public Health physician and an Associate Professor in the Department of Community Health Sciences at the University of Manitoba. He is enrolled in the Dalla Lana Fellowship in Global Journalism program at the Dalla Lana School of Public Health – University of Toronto.

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