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Does sugar tax work?

How effective was sugar tax (implemented in 2018) in UK in combating the obesity rate and chronic diseases? Should Kazakhstan implement it?




Would you eat 7 spoons of sugar at once? Would you allow your child to do so? Indeed, you are most likely to do so.

Sounds absurd, yet people in Kz had been consuming huge amount of sugar without realizing it. Its okay for one or two times, but what if we eat 7 spoons of sugar each week, each day щк every time, when we want like we do in form of sugary drinks?

The problem is its cumulative effect in long run may be deleterious.

This is the issue UK had been focusing since 2018 in public health area via introducing the solution to combat it in form of sugar tax. So, how effective was the sugar tax on beverages (implemented in 2018) in the UK in combating the obesity rate and chronic diseases?

Before we start – one question crosses our head - isn’t the consumption of SD (sugary drinks) in Kazakhstan much lower than in other countries?

The simple answer is no. More complicated one is that rising tendency of sold out sugary drinks and obesity rate in KZ is increasing, which is noted both by Kz reports and WHO 2016-17 studies.

Although, elder people - grandmothers/fathers are not inclined towards sugary drinks, average consumption rate of sugary drinks among youth is more than global average - being 5 servings per week. Additionally, it is worth noting that 1 in 2 school aged children consume SD every week.

So, it is recomended to consume 6-8 sugar spoons per week but in Kz, 17 spoons are consumed. Almost triple times higher and this amount only keeps growing. Data from MedicalNews (C.Lilis, 2019)


So, what is the problem?


Is there any exact correlation between SD and obesity, chronic diseases development?

Indeed, there is. According to Harvard proffessors research, 1-2 cans per day increase your chance to have diabete to 26%.

This is followed by the statistics that in 2018, among citizens of Kz, 1 in 2 adults was overweight, 1 in 13 children were obese. Almost 12% of them gained diabetes,leading to life-long dependency on insulin and constant doctor care (Global Nutrition, 2018) Compared to the exact statistics in 1990s in Kz, the number of obesity and diabetes cases doubled.


So, what is issue in economic terms? There are 6 of them for Kz.

1. As you may observe from official report of KZ health ministry to WHO, 31% of mortality has high systolic blood pressure, which is the exact diagnosis that was listed in prev slides. More than that, sudden death rate is increasing.

2. LFPR (labor force productivity rate) is decreasing since people in KZ for certain professions - such as naval military officers - may get retired with diabete 2 (which again, may arise from overconsumption). Secondly, overall leave of absence from work are increasing since 273 000 people took at least 1 time leave of absence from work five years ago. Now, as the number of those, who registered in medical records increased, there are approx 400 000 of them.

3. 1.3 trillion tenge is spent for first mandatory assistance. The government spending will keep rising if overconsumption wont stop (egov kz.)

4. Market failure: chronic diseases, sudden death rate increasing and etc are deadly welfare loss, which is occuring due to the fact that quantity opt is less than quantity equilibrium.

5. This drives to fifth problem, which is part of behavioral economics, irrational consumer behaviour.

6. Last but not least, 1 market is affecting the macroeconomics of Kz. Potential output is decreasing via the reasons mentioned above.



Preventative measures could work…or not...


I wish to tell how the preventative measures could be more beneficial than consecutive treatment of SD effect using the International ACE prevention studies table. The more we observe, more we realise how primary prevention measures are not only advantageous in amount, but also, mainly cost saving and cost-effective.

To be more specific, lets narrow down the focus on how one country already tackling this issue and showing the progress. According to UK research and innovation centre, before 2018 64% adult were obese and every 1 kid in 5 had obesity. UK government implemented excise tax, which rules and amounts are taken from official sources provided by them. The tax was targeted at manufacturers of the drinks to incentivise them to reduce the sugar percentage in soft drinks.


SUGAR TAX 2018 | SPECIFIC EXCISE TYPE OF TAX

· No levy on SD containing less than 5g of sugar / 100ml

· 18p / litre on SD containing between 5g and 8g of sugar / 100ml

· 24p / litre on SD containing more than 8g of sugar / 100ml.






How exactly this tax impacted on the issue?


The issue in UK, observed and studied between 2016-18, were relatively same as Kazakhstan is experiencing now. Chronic diseases, high income spending on treatments… SO what changed after the sugar tax?

Sugar tax on levies increased cost of production of each bottle, thus decreasing supply. Shortage of soft drinks but same demand led to higher prices, which decreased quantity demanded. It’s worth to mention that deadly welfare loss, which were in market, didn’t disappear but decreased.

Why? Well in theory tax should be same as external cost amount yet due to its inaccuracy in calculation and realistic approach to the results, we may conclude that sugar tax decreases DWL significantly, not eliminates though. In economic terms, the following tendencies could be observed:

· PED = 1.37 (BiomedCentre, 2017) - thus, most of the consumers are able and willing to switch the preferences. It not a necessity product.

· PES manufactured good = elastic - firms will adopt to gov rules, sustaining their profit and along the way, achieving the goal gov set


Results


1 year after…

Amount of sugary drinks brought didnt change. However, the amount of sugar decreased to 10% on avg, 250 ml/week on family. According to Guardian, this prevents 5237 girls in year 6 from obesity and shows 8% decline of obesity rate among kids too.

Results from 2019-now:

The total sugar sold in soft drinks by retailers and manufacturers decreased by 35.4% - from 135,500 tonnes to 87,600 tonnes. Sugar content of soft drinks declined by 43.7%, from 5.7g/100ml to 2.2g/100ml.

What could be concluded from the above? That sugar tax benefited the public health without harming the industry.

According to George Institute for Global Health “These findings show that the UK’s sugar tax is working exactly as intended – and offer lessons for other countries exploring strategic regulatory options to promote healthier diets.”


Is it all?


When it comes to limitation of the project, its worth to mention that Prices for high-levy increased from 31% (7.5p/litre) to 140% (33.6p/litre). Considering that according to UK statistics, the middle and low income families are the majority of target audience of sugary drinks, tax had regressive effect.

But to oppose the financial burden it caused, UK ministers reported that consumers had the ability to switch to substitude products andchange the preferences due to not being addicted or dependent as sugary drinks are not necessities. (PED and more information provided above)

Another thing to consider is, notice how Guardian highlighted that only girls were prevented from getting obese. Why not boys too? The answer is entangled within marketing or as behavioral economics puts it, imperfect information and bounded rationality affects young boys, teens more than girls. To prove the words Boys are not affected by the price increasing due to support of SD by sportsmen (Guardian, 2023), thus they are inclined to continue drinking energy drinks


So what?


Despite this though, sugar regulaions and sugar taxes are practiced in Singapore, Mexico, Australia. Thus, answering the question shall Kazakhstan implement it too? – we could say yes, but with partial changes and adaptations to our country, our market.

Why? I will explain soon. Stay tuned!


If you`d like to learn more about sugar tax or write suggestions, please, don’t hesitate to reach to me. All credits of the pictures and statistics belong to the authors. (cited in the article)

@Mira_Pamirovna (IG and TG)

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