State Secretary of Health, Welfare and Sport Maarten van Ooijen wants to introduce a ‘smart tax’ on sugar in the Netherlands. It seems simple; by increasing the sugar tax, the prices will go up, and the demand for sugar will decrease. However, tax experts like Ilona van den Eijnde, researcher at Erasmus School of Law, are sceptical; “A sugar tax will not be created overnight”. She explains this in the podcast Pointer.
The concept of a sugar tax is not new. Until 1993, The Netherlands taxed sugar at a higher rate. Furthermore, various other countries nowadays apply a sugar tax. The desired effect, however, remains absent, states Van den Eijnde. “When looking at the effects of a sugar tax, you are likely to find them disappointing. These can be the result of different causes. The most important one is that a sugar tax always burdens manufacturers, and (…) they decide how they will deal with this. Manufacturers can increase the prices of specific products, increase prices of other products or try to lower the buying prices. A sugar tax will therefore not necessarily burden consumers.”
According to Van den Eijnde, the desired effect (increased prices of sugar-containing products) will not necessarily be achieved. “If taxes would increase by twenty per cent, retail prices do not necessarily increase by twenty per cent as well.”
English model
England has implemented a stepped model for sugar tax; the more sugar a product contains, the higher the tax burden is. However, products with less than five grams of sugar are exempted. In which way the Netherlands might implement a sugar tax depends on the applicable EU regulations: “Measures have to be proportional, and a founding principle of the EU is free trade. So a sugar tax will not be created overnight.”
Furthermore, a sugar tax has to be quite significant even to reach an effect: “According to Dutch research, prices have to increase at least twenty per cent to witness any effect. And even then, it is still insignificant”.
Which way could work?
If the effects abroad are so disappointing, why would you want to implement a sugar tax, to begin with? Van den Eijnde has a couple of ideas: “A sugar tax can be part of a broader set of measures to raise awareness among customers. Subsequently, such a tax can persuade manufacturers to start using other ingredients.” Nevertheless, Van den Eijnde does warn that a sugar tax alone will not be effective enough. She encourages a combination with other regulations. “For example, packaging regulations or age restrictions for certain products. ‘And, and, and’ measures seem to have a lot more impact.”
- More information
Click here for the entire podcast Pointer (in Dutch).