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Beverage Taxes – a public policy idea that is turning into a “bust”

by: Jim Goetz

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As President of the Canadian Beverage Association I often find myself speaking about the myth that a sugar-sweetened beverages (SSBs) tax can cure obesity while funding a vast array of new programs. The sorry truth, however, as we are seeing jurisdiction after jurisdiction is that a tax of this sort simply does not work – where it has been tried, the evidence is stacking up. Taxation of beverages does not support better health outcomes, it is a tax on the lowest income households and it hurts small business.

We need only to look at where SSB taxes have been implemented to provide the evidence for why they won’t support the public health solutions that most government are trying to achieve. Take Mexico as an example. In the first year of their tax, caloric consumption only decreased by six calories per day in a diet of more than 3,000 calories per day. In addition, 60 per cent of the tax is being paid by the lowest income households.

 

What is also left out of the conversation about Mexico by pro-tax proponents is that the tax actually applies to a wide variety of products including cakes and snacks. So even when a wide tax net is thrown, it only produces an almost un-measurable reduction of calories in diets.

 

Most recently in Philadelphia where a soda tax was put in place (1.5-cents-an-ounce), a tax which is 24 times the state excise tax rate on beer, the impact on businesses and consumers has been very direct. Many media outlets are reporting significant job losses and even black-market operations being set up get around the tax. One hundred and fifty unionized delivery drivers have lost their jobs, a local beverage manufacturer has laid off 20 per cent of their workforce and store owners are slashing hours because of lost business. Problems are building for the city as well as revenue from the tax has come in far below what they projected. In July, city officials lowered beverage tax revenue projections by 14 per cent, leaving the pre-kindergarten programs that the tax promised to fund in jeopardy.

 

To sum it up, as the Wall Street Journal recently did, the Philly beverage tax is a “bust.”

 

I could also point to Denmark for yet another example where a very broad “fat tax” did not work. Denmark abandoned its tax 18 months after implementation. They noted that not only did the tax increase the cost of goods dramatically, it made no significant impact on individuals obesity or health. And, almost 1300 Danes were out of work as a result of the tax.

For businesses from restaurants to convenience stores, a tax on SSBs has a dramatic effect on their bottom lines. It is a short-sited attempt at solving many very complex health issues like obesity, which we know has numerous contributing factors. Let’s call the tax exactly what it is – as one British Columbia government official called it when researching the idea of a tax – “purely a revenue measure.”

MEXICOOnly 6 calories have been reduced from a 3000 calorie diet and obesity rates continue to rise.1DENMARK1300 jobs were lost, yet no measurable health benefits could be confirmed. 2PHILADELPHIANearly 150 jobs have been lost in 5 months, and a black market for taxed beverages is booming.3Canadian Beverage Associationwww.canadianbeverage.ca I www.balancecalories.ca1 Mexico's 2016 National Health Survey (ENSANUT), finding that the prevalence of obesity and overweight rose overall from 71.2% to 72.5% among adults from 2012-2016, and among adult women it rose from 73% to 75.6% during that same time frame, a statisticalty significant result.2 “The Proof of the Pudding Denmark's fat tax fiasco.” by Christopher Smvidon, Institute of Economic Affairs.3 As seen on Fox News story “Shoppers avoid sugar tax by crossing county lines”.THE WEIGHT OF BEVERAGE TAXES

Science and research matter when you are talking about the health of Canadians. That is why the Canadian beverage industry has partnered with the Conference Board of Canada to launch the Balance Calories Initiative (BCI). This industry lead initiative aims to reduce the per-capita calories that Canadians get from their non-alcoholic beverage by 20 per cent by 2025. Our industry thrives on innovation and the BCI allows us to do just that. Through portion control, reformulation and innovative in new products we are working towards our 2025 reduction goal.

Our industry will continue to work hard to provide Canadians with choice in the products we produce. We will also support evidence based policy decision that allow for Canadians to make educated decisions. This must be done though, while balancing the ability for the beverage industry to thrive and innovate and continue to support the over 60,000 hard-working Canadians employed directly and indirectly by our industry.

Jim Goetz is president of the Canadian Beverage Association, the national association representing the companies that manufacture and distribute the majority of non-alcoholic beverages consumed in Canada. He also serves as president of the International Council of Beverages Associations, is a member of the board of Encorp Pacific, a provincial product stewardship corporation, and is chair of the board of the Canadian Beverage Container Recycling Association, an industry-led Extended Producer Responsibility organization.

The Ontario Convenience Stores Association (OCSA) is speaking out about the Government of Ontario’s plan to raise the minimum wage to $15 per hour and is urging all convenience store owners and those involved with the c-store industry to do the same.

 

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