How sin tax will take the fizz out of soft drink companies
If there was an award for making pro-health public policies in India, its winner for 2015 would not be a policymaker in the ministry of health but someone in an unlikely place — the ministry of finance.
By introducing a new slab of taxation for unhealthy products in the proposed Goods and Services Tax (GST) regime, chief economic advisor Arvind Subramanian has set the ball rolling for one of the most critical policy reforms in public health. The new tax category has been aptly dubbed "sin tax" or demerit rate and it, for the first time, places aerated sugary beverages (so called soft drinks) alongside tobacco products and paan masala, which for long have been identified as a major trigger factor for a range of cancers. The 40 per cent sin tax would be in addition to central levies like excise.
The sin tax is important on several grounds. It brings tax regime in sync with science. It does not make economic sense to keep taxes low on soft drinks and tobacco when the economy is losing billions of dollars every year with growing burden of non-communicable diseases — heart attacks, diabetes, obesity and cancers. If higher prices can deter people from consuming harmful products, the tsunami of lifestyle diseases can be checked to a great extent. Like the tobacco industry that tried to deflect blame for cancer in the 1970s, the soft drink industry is making desperate bids to shift the blame of obesity from extra intake of sugar to physical inactivity. Companies like Coca-Cola are pumping million of dollars in outfits such as Global Energy Balance Network and some university departments to invade scientific journals and popular media with the message of “focus more on exercise and less on cutting calories”.
Enough number of studies in countries facing obesity epidemic show that a bulk of extra calories comes from added sugar in carbonated drinks. A 250ml bottle of Limca contains 27.5gm of sugar, which translates into nearly seven teaspoons of granulated sugar. One 335ml can of Coca-Cola contains 39gm of sugar. Clearly drinking sugary beverages leads to obesity, because just ten per cent of our total energy intake should come from free sugars, according to the World Health Organisation.
That’s why it is preposterous for junk food makers to blame physical inactivity alone. You can’t entice people all the time to guzzle extra calories and then tell them to spend time at a gym. India is the world’s sixth largest market for soft drinks, consuming 24 billion litres of sugary drinks every year. The market size in terms of retail value, according to recent estimates, has more than doubled in just five years from 2010.
Industry sympathisers argue that if the government considers sugar unhealthy, then why not end subsidies for sugar production? Certainly mechanisms should be evolved to end subsidies for sugar meant for beverages factories. The government also needs to abolish state support for tobacco production, research and marketing as well as legally curb celebrity endorsement of products covered under sin tax.