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Spain and Estonia to tax sugary drinks

Niamh Michail

By Niamh Michail+

07-Dec-2016
Last updated on 08-Dec-2016 at 11:17 GMT2016-12-08T11:17:58Z

Spain's tax looks set to come in next year, while Estonia's plans are ongoing. © iStock/ElenaChaykina
Spain's tax looks set to come in next year, while Estonia's plans are ongoing. © iStock/ElenaChaykina

Spain and Estonia are the latest EU countries to announce plans for a tax on sugar-sweetened beverages.

Spain’s finance minister Cristóbal Montoro officially revealed the government’s plans last week, although reports were already circulating in the national press, and it looks set to come into effect next year. Estonia announced plans back in September but a timeline for its tax is less clear. The government's preliminary analysis is expected to be complete by March 2017.

Although specific details of Spanish proposal were not released, Monitoro said the aim was to discourage consumption of sugary drinks over low-sugar alternatives. It is expected to bring in around €200 million in 2017.

The Spanish levy on sugary drinks was announced along with a battery of measures aimed at raising a total of €8 billion and reducing the country's public deficit. Corporate tax will be increased, as will levies on alcoholic drinks.

Industry group Anfabra, which represents the interests of the soft drinks industry, said it was “completely dissatisfied” with the proposed measure.

In Spain, around 23% of adults (24.4% of men and 21.4% of women) are considered obese, while a further 39.4% are overweight (46.4% men and 32.5% women), according to 2011 figures. 

Estonia has one of the highest obesity rates in the EU. Over half (52%) of people aged 16–64 years were overweight or obese in 2014, an increase of 10% compared to 1992, according to a 2014 survey .

“We regret the way it is happening, without dialogue with the affected sectors and in a surprising way. The sector has learned through information published in the media,”  it said in a statement in Spanish. “Our industry has always demonstrated its commitment to dialogue and the search for solutions."

Anfabra said industry has cut the sugar content in sugary drinks by 23% in the past 10 years, and is working with the Ministry of Health to push for a voluntary commitment that would ensure further reductions.

Estonia

The Estonian government's ruling parties have agreed that a tax on drinks with a high sugar content will be imposed during the coalition's rule, which will run until 2019.

"But it has not yet been decided when, in what form and to what products it will be applied," said a spokesperson for the Estonian Ministry of Social Affairs.

She added that the Ministry of Finance is currently developing the proposal, and will consult an impact analysis of a tax on sugar-sweetened beverages compiled by the Ministry of Social Affairs (available here in English ). 

© iStock/Tuomas_Lehtinen

Using examples from other countries, this report evaluates four different policy options for addressing childhood obesity: restricting advertising of unhealthy foods; front of pack labelling; school intervention and education programmes; and taxing sugar-sweetened beverages whilst subsidising healthier food groups or alternative beverages.

The report said that to maximise the effect, taxes and subsidies should be at least 10–15% of the product's price.

“In conclusion, we found that the four policy options complement each other and, if implemented in combination, would help to reach the goal of better health outcomes. Comprehensive, multi-component interventions will reduce the consumption of sugar-sweetened beverages and their negative health effects. Thus, taxes should be accompanied by subsidies for healthy alternatives, educational programmes and labelling," the report said. 

The report also gives advice on how to deal with industry opposition.

“The food industry in Estonia is not ready for restrictions, additional taxes or labelling and is lobbying against the government’s goals. The government should therefore have a good communication strategy to balance understanding of the problem, policy options and their impact.”

Advertising restrictions, for instance, could be imposed step-by-step to make them more acceptable, it said.

A spokesperson for the Union of European Soft Drinks Associations (UNESDA) said although it had few details on either the Spanish or Estonian tax, it did not support taxes in general as an effective way to address public health goals.

While taxation can reduce consumption of the taxed product, consumers may then switch to non-taxed products which contain similar nutrients. We have seen no evidence of a positive impact on body mass index (BMI) and overweight in countries where taxes are levied.

"However there is clear evidence of negative impact on the economy and jobs. Reformulation, innovation and portion control are more effective in reducing calories in the diet.”

Why the focus on sugary drinks and not sugary foods?

© iStock/OcusFocus

According to the Estonian government’s report, the link between sugary drinks and weight gain is stronger than for any other food or beverage, and it notes that nearly 90% (89.2%) of Estonian schoolchildren drink sugar-sweetened beverages in general, and 57% drink them at least once a week. 

Meanwhile Estonia's food industry group, Eesti Toiduainetööstuse Liit, said in a statement that under EU law member states are not allowed to impose discriminatory taxes on similar products within the single market, and noted that Finland's tax (on confectionery and ice cream) and Denmark's tax (on saturated fat) have been waived for this reason.

Yet although the Finnish confectionery tax is set to be scrapped in 2017, its soft drinks tax, which has been in place since the 1940s, will stay.

Leena Savolainen, an economist at Finland's Taxpayers' Federation, told FoodNavigator this is because, in the eyes of the European Commission, the confectionery tax did not treat different but similar products equally.

Sweets are taxed, for instance, but cookies are not. "With [the] soft drinks tax, this has been much more simple and straightforward – problems of similar scope have not been detected. There have been some minor issues concerning the phenomenon but they have been resolved."

The EU commissioner for competition Margrethe Vestager recently confirmed in an answer to an MEP's written question that member states are free to impose taxes on products or activities that have a negative effect on the environment or human health as long as all products generating this negative effect are taxed equally.

Tax the ingredient?

Meanwhile, Anfabra said it was unfair and discriminatory to tax a category for its use of an ingredient but not tax the ingredient itself.

But its Estonian counterpart Eesti Toiduainetööstuse Liit warned against countries taxing sugar as an ingredient, saying it would make domestic products more expensive than foreign ones. 

In particular, it would undermine our ability to export the food and beverages. With one million consumers in the market, however, is the export of Estonian food industry [that is] the basic prerequisite for survival.”

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