Soft drinks should be taxed in the same way as cigarettes and leaded petrol to boost the budget by $520 million per year and tackle Australia's obesity epidemic, according to a new report.
The supertax, to be applied to the sugar content of non-alcoholic water-based drinks in addition to the GST, would be set at 40 cents per 100 grams of sugar.
Unless it spurred manufacturers to cut the sugar content of their drinks, it would add 80 cents to the price of a 2 litre soft drink, 15 cents to the price of a 375ml can, 14 cents to the price of a 600ml sports drink, and 11 cents to the price of a 250ml energy drink like Red Bull.
The report's principal author, Stephen Duckett, is a former head of the federal Department of Health.
"Almost 30 per cent of Australian adults are clinically obese and another 35 per cent are overweight," he told Fairfax Media. "Back in the 1980s it was less than 10 per cent."
"Obese people use general practitioners more frequently, they use hospitals more frequently, they have more pharmaceutical prescriptions, they are more likely on social services, and they are less likely to be in employment. All up, the cost to taxpayers of obesity amounts to around $5 billion per year."
The report, prepared for the Grattan Institute, finds about 10 per cent of Australia's obesity problem is due to soft drinks. Roughly half the added sugar consumed by teenagers comes from drinks, one third of it from soft drinks.
Supertaxes on sugary drinks have been applied or are about to be applied in the United Kingdom, Ireland, Belgium, France, Fiji, Mexico, South Africa and five regions in the United States.
Experience in these countries suggests that a tax of the kind proposed by the Grattan Institute would cut the consumption of sugar-sweetened beverages by around 15 per cent as people switched to water or artificially sweetened beverages, although much depends on how the tax is presented.
"When the extra tax was imposed on leaded petrol, people could see the higher price when they walked up to the pump," Dr Duckett said. "Then they were able to compare the performance of unleaded petrol against leaded petrol and discovered that it made no difference."
A tax based on sugar content would also encourage manufacturers to put less sugar in their drinks, an outcome that would be less certain if the tax was simply applied to the price of drinks as proposed by the Greens.
Dr Duckett conceded even if the tax did cut consumption of soft drinks, it might not necessarily cut obesity, saying it was too early to tell what had happened overseas. But he said the World Health Organisation had acknowledged that merely stabilising obesity would a worthwhile goal. The sugar industry would suffer a drop in sales of only 1 per cent, which would have a minimal impact on overseas prices.
While the tax would hit low-income households harder than high-income households, low-income households spent relatively little of their income on soft drinks - less than 1 per cent. Unlike with tobacco, there would be more lightly taxed substitutes. The extra budget revenue of $520 million per year could be spent on health promotion or used to cut the budget deficit.
