NZBC Statement: Report on Mexico ‘sugar tax’

Auckland: 18 May 2015

While much of the report focuses on results you would expect when a price rise on a popular product is forced on consumers, there is no evidence or even assertion it has achieved the core target of eliminating obesity. All it says is that responders claim they are consuming fewer sugar sweetened beverages. From that claim the researchers have concluded the tax has been effective. It’s a bit like asking drivers if they are obeying the speed limit and when they say yes, claim the road toll is lower.

There is no evidence in the report that reveals who has changed their consumption patterns. It does not distinguish between the stated habits of those who only ever consumed a small quantity of SSBs and now drink less and those high consumers who have retained their level of consumption. Both the groups are counted in the overall percentage result. There is no evidence that specifies high consumers of SSBs, the cohort where education efforts should be targeted, are drinking less.

There is also the issue of accuracy of the collected data. The report writers themselves acknowledge that these findings are based on panel research which is recognised as being less accurate than actual sales data. This is because there is frequently a difference between what consumers say they do and what they actually do. There is no evidence to suggest this pattern is sustainable and that purchasing levels wont revert to the pre-tax levels of a year ago.

The crux is this: this tax was supposed to curtail obesity and in that respect increasing the price of a single item has been an abject failure. There is nothing to suggest that targeting a single product with a punitive tax is leading to lower levels of obesity in Mexico nor in any other country. That’s because the causes of obesity are much more complex than can be dealt to by lowering the consumption of a single product.

Equally concerning are indications that sadly it appears this tax is, as predicted, hitting the poorest consumers hardest. And the likelihood is this sector will turn to cheaper products without the quality controls of the recognised brands.

In the meantime, the Mexican Government which budgeted on raising $US850 million actually collected $1.2 billion and yet it seems just a tiny amount of the extra tax collected has actually gone into anti-obesity measures. Clearly however the Government sees this as acceptable and even desirable as they are now budgeted on collecting $1.25 billion in taxes based on an expectation there will be an increase in consumption. Surely expecting consumption to increase is evidence they knew imposing the tax to eliminate obesity would not work but saw it as an effective revenue growing measure.

There have also been predictable if unintended outcomes. There was an assumption producers would pass the increased cost onto consumers. It appears this did not happen and instead they absorbed the tax or spread it across the range of the products resulting in price rises on products such as bottled water.

This style of tax won’t achieve the target hoped for by proponents. It will make little if any difference when demand for a product is inelastic. New Zealand is a very different to Mexico. It has a higher-wage economy so adding 10 cents to the price of a 1.5-litre bottle will not change anyone's buying habits in the long term and any short term decrease in purchase or consumption will eventually trend upwards. As we have said time and again, there is a need for consumers to be aware of the appropriate place of treat foods in their diets. And industry needs to play a part in assisting consumers come to terms with this information. When that happens alongside a planned and coordinated approach to the development of a balanced and healthy lifestyle that centres on diet and activity then Kiwi’s can expect the rates of obesity to fall.

- ends.

For further information email or contact:

Olly Munro (President, NZBC) on 021-611656
Peter Heath on 021-456353

© The New Zealand Beverage Council (Inc.), 2015.

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