By 31.01.2013 | Press release 11/2013
The Sugar Tax Working Group, which started its work at the beginning of 2012, has today submitted its final report. The working group has explored the taxation of sugar with the aim of increasing central government tax revenues and promoting healthy nutrition. In addition, the working group studied the effectiveness of the current excise duty on sweets, which is directed at sweets, soft drinks and ice cream, as well as opportunities to expand its tax base as an alternative to a sugar tax.
The working group emphasises in particular influencing children's and young people's consumption. Obesity among children and young people has increased. Behind this trend are immobility and excessive energy intake, which is increased by, among other things, sugar-sweetened soft drinks as well as consumption of unhealthy snacks. From this perspective, the current excise duty on sweets is considered to be fairly effective, because it is directed at unnecessary products in terms of nutrition that are consumed by children and young people in particular. Adjusting the tax base and tax levels of the present excise duty on sweets to promote healthy nutrition is also possible. Studies indicate that there is no assurance that a tax based on the sugar content of foods would achieve a better steering impact in terms of health than the current excise duty on sweets.
Uncertainties connected with the health-promotion impact of taxation
Sugar's connection with obesity, chronic diseases and dental health have been highlighted in the latest research. The working group emphasises, however, that health problems cannot be resolved merely by taxing sugar. Achieving the health promotion objective would require other effective measures alongside taxation as well as the examination of other nutritive substances - saturated fat and salt, for example - alongside sugar. To achieve health effects, other tools, such as legislation, recommendations, control and communications, should also be utilised.
When considering taxation, the fact that tax is not necessarily transferred in its entirety into product prices should also be taken into account. It is also possible that, when taxing sugar, consumption would shift to cheaper products or that sugar-containing products would be replaced by other products considered to be unhealthy, such as salty snacks. Using taxation as a control measure and evaluating its impact would also require information on the consumption of foodstuffs and changes therein to be quantitatively and qualitatively better than at present.
Combination model developed by working group would promote health nutrition best
The working group compared three tax models, and assessed their suitability and impacts. The final report presents a tax model based on total sugar content, a tax model similar to the current excise duty on sweets, and a tax model combining the two. In the combination model, the tax is levied gradually on certain products according to sugar content, which would encourage manufacturers to reduce the sugar content of foodstuffs. The combination model would be the most optimal in terms of health promotion, but its conformance with EU rules on government aid is uncertain. Both the sugar tax and the combination model would impose a significant administrative burden on taxpayers falling within the sphere of the tax, and they could not easily be implemented before the entry into effect of a duty to declare sugar content in 2017. The excise duty on sweets model is the most suitable in terms of practical implementation.
Due to difficulties in assessing impacts, it has only been possible to present indicative estimates of the effects of taxation. Sugar taxation might have the effect of narrowing health differences in the population, because demand among those on low incomes reacts most to tax changes. Those on low incomes spend a greater proportion of their income on food than those on high incomes, so taxes that increase the price of food will reduce the purchasing power of the disposable incomes of low earners more than that of high earners.
Current excise duty on sweets, ice cream and soft drinks has been effective overall
The working group found that the current excise duty on sweets has functioned as expected and without major problems. The new tax has naturally given rise to administrative costs for companies falling within the sphere of the tax. In the tax as currently constituted, however, the effects are significantly less than in the models based on sugar content.
The working group considers the current excise duty on sweets to be effective and fairly efficient, because the excise duty on sweets is directed mainly at products poor in nutritional content, which are particularly attractive to children and young people.
Consultation
The Ministry of Finance requests comments on the final report of the Sugar Tax Working Group. A call for comments has been published in conjunction with the final report.
After consultation, the Government will discuss the matter at the end of February.
The final report of the Sugar Tax Working Group (summary in English)
For further information, please contact:
- Chair of the Working Group, Senior Adviser Tanja Nurmi, tel. 358 295 530335 (not, however 4-7.2.2013)
- Finance Secretary Veli Auvinen, tel. 358 295 5530384
- Government Counselor Merja Sandell, 358 295 530191
- State Secretary Tuire Santamäki-Vuori, tel. 358 295 530133
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