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NZ Report on Sugar Taxes

15 / 03 / 18

The New Zealand Ministry of Health engaged the New Zealand Institute of Economic Research (NZIER) to write a report on sugar taxes in 2017. The report has just been made public.

The report concludes the evidence that sugar taxes improve health is weak.

The Initiative’s Chief Economist Dr Eric Crampton said: “It is encouraging that the Ministry of Health under the prior National government sought sound independent advice on the effects of sugar taxes.”

The report assessed the evidence for sugar taxes as a fiscal instrument to improve health and reviewed forty-seven studies and working papers published in the past 5 years.

In their review of the literature, the NZIER found:

  • Taxes do generally appear to be passed through to prices and some reduced demand is likely
  • Estimates of reduced intake are often overstated due to methodological flaws and incomplete measurement
  • Price elasticities* from early studies with fundamental methodological flaws have later been used in a number of other studies to assess the impact of sugar taxes, resulting in significantly overestimated reductions in demand (for sugary drinks).

*NOTE: price elasticity of demand describes the differences in demand for a product when the price changes. In this case, the reduction of demand for sugary drinks when the price goes up.

  • There is insufficient evidence to judge whether consumers are substituting other sources of sugar or calories in the face of taxes on sugar in drinks
  • Studies using sound methods report reductions in intake that are likely too small to generate health benefits and could easily be cancelled out by substitution of other sources of sugar or calories
  • No study based on actual experience with sugar taxes has identified an impact on health outcomes
  • 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.
  • No study based on actual experience with sugar taxes has identified an impact on health outcomes.

You can find Sugar taxes – a review of the evidence online here.

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