An assessment on the effectiveness of a soft drink tax in reducing total sugar consumption
Date
2015-12
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Abstract
This paper aims to determine the effectiveness of imposing a tax on soft drinks to reduce total
sugar consumption. According to a study by the American Heart Association (AHA), soft drinks
are the leading source of added sugar (AHA, 2014). According to the World Cancer Research
Fund International (WCRF International) there are three approaches to reduce sugar intake: (a)
reduce the availability and affordability of sugar and sugary products (b) influence the
acceptability for alternatives and (c) raise awareness about the sugar contained in products
(WCRF International, 2015). We use a demand for sugar model to estimate the taxes on soft
drinks to be imposed. In constructing this model, we computed for the expected sugar intake
from a regular or commercial dose of soft drink. We do this in order to reference actual
consumption with established sugar levels. We estimated our model using the 2013 Annual
Poverty Indicators Survey of the Philippine Statistics Authority. Due to missing variables on soft
drink prices, we used a two-step model to estimate predicted household consumption and prices.
The basic estimates of elasticity for soft drinks range from -0.8 to -1.0 (Andreyeva et al., 2010)
consistent with our results of -1.0. Controlling for factors such as age of the household member,
region, education of the household head, and income we find that an increase in the price of soft
drinks leads to reduced consumption of soft drinks but total sugar consumption does not decrease
by a significant amount.
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Keywords
soda, taxation, sugar