No evidence to support New Zealand sugar tax after PM states 'all options are on the table'

By Lester Wan

- Last updated on GMT

The New Zealand government-commissioned NZIER report debunks justification for the sugar tax, finding it is unlikely to improve health outcomes. ©GettyImages
The New Zealand government-commissioned NZIER report debunks justification for the sugar tax, finding it is unlikely to improve health outcomes. ©GettyImages

Related tags sugar tax New zealand Tax

The New Zealand Taxpayers' Union and free-market group the New Zealand Initiative have voiced their opposition to a sugar tax in the country, based on the findings of a government-commissioned report.

Essentially, the report by the New Zealand Institute of Economic Research (NZIER) debunks popular justification for the sugar tax and finds that a tax is unlikely to improve health outcomes.

“NZIER’s findings mirror what the Initiative concluded in our 2016 report, ‘The Health of the State’. Sugar taxes are administratively burdensome and are unlikely to provide any substantial benefit,”​ said Dr Eric Crampton, the Initiative’s chief economist.

Study finds sugar tax ineffective

Among other findings, the Taxpayers' Union and Initiative highlight that the research finds in earlier studies the estimates of reduced sugar intake are often overstated due to methodological flaws and incomplete measurement; studies using sound methods report reductions in intake that are likely too small to generate health benefits and could easily be cancelled out by the substitution of other sources of sugar or calories; and no study based on actual experience with sugar taxes has identified an impact on health outcome.

“The evidence that sugar taxes improve health is weak​,” the report summarises.

“I would especially encourage sugar tax proponents to read NZIER’s review. This independent report shows that sugar taxes do not stack up,”​ said Dr Crampton.

A tax could be harmful

Jordan Williams, executive director of the Taxpayers' Union, had stronger words. He said that the politicians pushing for it need solid evidence to justify it.

“The report concludes by reminding the government that taxes inflict real financial harm,”​ he said.

Most alarmingly, the report points out: “Taxes are costly to administer and comply with and, especially in the case of people who are not the target of the intervention, come with deadweight losses that reduce their welfare.”

“They should only be introduced if they are the best way to improve health. Recent behavioural economics research suggests that other initiatives, like publicity campaigns and restricting access should also be tested to see if they have a better effect,” ​advised the researchers.

Said Williams: “Public health activists would have you believe that opposition to sugar tax is driven by big business and ideology. In truth, it’s the pro-tax lobby that ignores evidence in favour of pursuing a tired, authoritarian agenda.”

Clear conclusion

The authors of the report, Peter Wilson and Sarah Hogan, also found that studies that report health improvements are modelling studies that have assumed a meaningful change in sugar intake with no compensatory substitution, rather than being based on observations of real behaviour.

“We have yet to see any clear evidence that imposing a sugar tax would meet a comprehensive cost-benefit test,” ​added Wilson and Hogan.

NZIER is a specialist consulting firm that uses applied economic research and analysis to provide a wide range of strategic advice to clients in the public and private sectors.

The New Zealand government commissioned NZIER for the analysis, of which the report was produced in August 2017. However, it was made public only on Jan 31 after an official request from the Initiative, with assistance from the Ombudsman’s Office.

Industry fears of an impending sugar tax increased in October when new Prime Minister Jacinda Ardern warned that the food and drinks industry needed to cut down on sugar and salt in products, adding "all options are on the table”.

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