The study found demand for sugary cereals fell by 48% if consumers knew a tax was being applied and consumers purchased healthier alternatives.
Rising obesity rates have led to policy interest designed to influence and regulate dietary behaviour.
A levy on sugar, or a ‘fat tax’ has already been trialled in different forms in Denmark, France, Hungary, and Norway in an attempt to address the external costs arising from obesity. The UK has just announced one on soft drinks.
1,000 UK citizens were enrolled in the study and given £10 (€12.65) to spend on soft drinks and cereals.
Researchers from Newcastle, York and Anglia Ruskin Universities classed the products as either healthier or less healthy, depending upon their nutritional value.
Additional findings found that a 40% tax was effective at reducing the purchase both of unhealthier cereals and sugar-sweetened beverages.
The team also found a 20% tax significantly reduced the sale of the cereals but not of the less healthy drinks.
Shoppers, who knew they were being taxed by 20%, restricted their purchases of both sets of products by around half.
“A sugar tax places an incentive on consumer to buy taxed products less and it places a corresponding incentive on companies to reduce the amount of sugar,” said lead researcher, Daniel Zizzo, professor of Economics at Newcastle University Business School.
“Our own experimental evidence showed that a 20% tax on less healthy beverages is only effective when it is sign-posted, i.e. one cannot just rely on the price change.”
Real world experiences
The results of this study compliment those from a Public Health England (PHE) report published last October, which considered a tax or levy of 10% to 20% on high sugar products.
They also follow on from a 10% tax on sugary drinks in Mexico, which saw sales drop by an average of 6% over a year.
In complete contrast, a tax on food which contained over 2.3% saturated fat, led Danish citizens to the border to Germany and Sweden to purchase cheaper butter and bacon products.
Despite the findings of this study and those performed by PHE and the Mexican government, Zizzo commented that a multi-pronged strategy was the best way of changing consumer behaviour in the long term.
“Intervention to reduce sugary food consumption (including a sugar tax) should not occur in a vacuum,” he said. “There is evidence suggesting that something like the location of product displays matters. The effectiveness of this does vary.
Zizzo also questioned how micro-regulation would operate observing that in general the more the micro-regulation required, the more it is likely there was to be more ‘red tape’ for businesses.
Indeed, the implementation of the Danish fat tax required a huge amount of bureaucracy to implement and placed a heavy burden on food companies in Denmark.
“A burden is avoided through creative solutions and that would be especially damaging for small retailers, who are less likely to be able to deal with the additional ‘red tape,” he noted.
“I’m very open-minded towards alternative and complementary approaches, but I do not see this as a matter of putting all of one’s eggs in one basket, whether price-based or otherwise.”
Source: University of York, Centre for Health Economics
Published online ahead of print, http://www.york.ac.uk/che/news/2016/che-research-paper-131/
“The Impact of Taxation and Signposting on Diet: An Online Field Study with Breakfast Cereals and Soft Drinks.”
Authors: Daniel John Zizzo et al.