Back to the drawing board on sugar tax

  • Poorly thought out: government policy is ikely to cause unsustainable price rises

    Poorly thought out: government policy is ikely to cause unsustainable price rises

Last week I discussed the Bermuda Government’s Sugar Tax Consultation Paper, which at best could be described as pseudo-consultation. Based on the comments I have received, a further consideration of the issues arising from sugar tax seems appropriate.

What is clear is that the Government is not interested in your view as to whether sugar tax will have the real effect of reducing obesity, healthcare costs or improving the overall health of our community.

When considering the government paper, one should read the report entitled Fiscal Policies for Diet and Prevention of Noncommunicable Diseases published by the World Health Organisation in May 2015 as regards sugar tax.

Not unexpectedly, the Government has failed to tell you what the WHO report recommends in respect of sugar tax implementation. Perhaps it is because the executive summary of the WHO report exposes the failure of the Government to properly address the effective use of or need for sugar tax.

The WHO report states that “there is reasonable and increasing evidence that appropriately designed taxes on sugar-sweetened beverage would result in proportional reductions in consumption, especially if aimed at raising the retail price by 20 per cent or more”.

We have no idea what the Government’s intent is in this regard.

The WHO report states that “ ... subsidies for fresh fruit and vegetables that reduce prices by 10 per cent to 30 per cent are effective in increasing fruit and vegetable consumption” and that “greater effects ... may be accomplished by combining subsidies on fruit and vegetables, and taxation of target foods and beverages”.

Apart from proposing 0 per cent duty on water, which is welcomed, the government report makes no mention of subsidies on healthier foods. But apparently the Government knows best. After all, based on its own assertions in the government paper, it will do a better job implementing sugar tax than everyone else

The WHO report states that “a proper situation analysis, good political advocacy, appropriate objective setting and evaluation should be part of the multidisciplinary development and implementation of such policies”.

On this the Government gets an “F” before it even gets out of the gates.

As for the use of the monies raised by a sugar tax, the WHO report indicates that “earmarking [of sugar taxes] will improve the transparency of the taxation process and use of revenues ... when the objective of the tax policy is health, rather than solely economics, it may be easier to discuss earmarking for health ...”

In Bermuda this will not happen since all revenue simply finds its way to the Consolidated Fund. The government paper has said that monies raised will help to fund education campaigns, but no figures are provided or indication provided of what the education campaigns will involve. Will it include the hiring of nutritionists to educate our children, parents and teachers? Or will it just mean making fancy advertisements posted on social media? We have no idea.

What is clear from the WHO report is that it does not say that a sugar tax has any effect on reducing obesity. There is simply not enough data to confirm the theory. Gojka Roglic, WHO medical officer and the lead author of a global report on diabetes, says that “the effects on weight are probably going to show in five years or more [in Mexico]” and that “other measures including the regulation of marketing of sodas and unhealthy foodstuffs would have a positive effect on obesity reduction”.

Are we really willing to introduce a tax that has an unknown impact? Apparently, the Government is.

Based on the extracts of the WHO report, for a sugar tax to have a real chance of reducing obesity the following is required:

1, Retail prices on sugar drinks would need to be raised by 20 per cent or more — we do not know the Government’s intent in this regard

2, Subsidies for fresh fruit and vegetables would need to be between 10 per cent and 30 per cent — there is no indication in the government paper that this will happen at all

3, Taxing “other foods and beverages high in sugar, salt and fat” up to 50 per cent would help to reduce obesity — there is no indication of this other than a promise in the government paper that “in subsequent phases the tax will be introduced by means of new national tariff codes ...”

4, Earmarking revenues raised from the sugar tax for healthcare (see above as to why that is unlikely to happen)

5, “Proper monitoring and evaluation to measure the effect of the sugar tax.” The Bermuda Government has difficulty getting proper employment figures, so I have little faith that we can monitor sugar tax effectively. The government paper does list a number of worthy initiatives already undertaken by the Ministry of Health to reduce obesity through education campaigns, but there is no information provided as to whether they are in fact working, increasing my scepticism on the Government’s ability to measure success rates of a sugar tax in Bermuda

6, “Requiring warning labels on taxed products as an education strategy.” This would be next to impossible since the costs of requiring such would be completely cost-prohibitive because such warning labels are not already affixed to products that are imported from our main purchasing points

7, “Drafting a multidisciplinary policy and implementation plan that includes advocacy for political buy-in monitoring and evaluation is critical.” In Bermuda this has not happened and, in fact, the government paper makes it clear the Government does not want input on implementation or administration or whether we should have a sugar tax at all — presumably the Government will say that sugar tax was part of an election manifesto and as such they will say they have a mandate for sugar tax introduction. The Government’s approach is “father knows best”. Unless “father” is a trained doctor or nutritionist, this “head in the sand” approach will not work for our community.

There have been a number of conflicting global studies in respect of whether sugar taxes disproportionately affect the poor. What is clear is that any food-price rises without corresponding subsidies on fruit and vegetables so as to encourage purchasing of alternative food and drink will absolutely affect the poor disproportionately — such subsidies could be funded by using the sugar tax.

What also concerns me is the effect the sugar tax will have on the hospitality industry in Bermuda and the knock-on effect it will have on jobs. For example, how much more will a Dark ‘N’ Stormy now cost at the bar? How much more will a slice of cake cost at any restaurant? How much will a cup of coffee increase? How will the inevitable price increase affect profits? Will food and beverage sales in restaurants/bars/coffee shops decrease as a result? Will decreasing sales mean laying off staff?

Absolutely none of this has been discussed or published by the Government for the public to discern.

What is clear is that the policy is poorly thought out, inadequately researched and is likely to cause unsustainable price rises with minimal effect on reducing obesity in Bermuda, especially when you consider the WHO report in its entirety. The Government should end this madness and go back to the drawing board.

Michael Fahy is a former Minister of Home Affairs, Minister of Tourism, Transport and Municipalities, and Junior Minister of Finance under the One Bermuda Alliance government

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Published Jan 23, 2018 at 8:00 am (Updated Jan 22, 2018 at 9:27 pm)

Back to the drawing board on sugar tax

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