Should Sugary Soft Drinks Be Taxed?

According to a new report from the Grattan Institute, Australia should introduce a tax on sugary drinks to help recoup some of the costs of obesity to the community.

A sugary drinks tax: recovering the community costs of obesity calls for a new excise tax of 40 cents per 100g of sugar, on all non-alcoholic, water-based drinks that contain added sugar.

The tax would increase the price of a two-litre bottle of soft drink by about 80 cents, raise about $500 million a year, and generate a fall of about 15 per cent in the consumption of sugar-sweetened beverages, as consumers switched to water and other drinks not subject to the new tax.

The report, to be released at Parliament House in Canberra on Wednesday, calculates obesity costs Australian taxpayers more than $5.3 billion a year.

Obese people are more likely to go to doctors and be admitted to hospital more often than other people. They are also more likely to be unemployed and therefore paying less tax than the rest of the population.

These costs – more taxpayer dollars spent on healthcare and welfare, and less tax raised – are caused by obesity but borne by the entire community. The new tax would help redress that imbalance.

Obesity is rising dramatically in Australia: one in four adults are now classified as obese, up from one in ten in the early 1980s. Perhaps even more worryingly, about 7 per cent of our children are obese.

The report stresses that a new tax is not a “silver bullet” solution to Australia’s obesity epidemic – that would require a whole suite of new policies and programs. But the proposed tax would encourage healthier lifestyles.

“Obesity is one of the great public health challenges of modern Australia, and so this is a reform whose time has come,” says Grattan Institute Health Program Director Stephen Duckett. “We target these drinks because most of them contain no nutritional benefit.”

The many countries that already have or are planning to introduce a tax on soft drinks include France, Belgium, Hungary, Finland, Chile, the UK, Ireland, South Africa and parts of the United States.

The report says the Australian government could use the $500 million a year raised by the new tax to reduce the budget deficit or boost healthcare funding, or the money could be spent on programs designed to treat obesity and promote healthy eating.

“How we use the money is a debate for later,” Dr Duckett says. “For now, Australia should introduce this tax because it offers twin benefits: it will reduce the number of people who become obese and it will ensure fewer taxpayer dollars have to be spent on the damage done by obesity.”

Read the report or download a broadcast quality recording of Stephen Duckett discussing the report.

In response to this and similar suggestions however, the Australian retail, farming, grocery and beverage sectors (see image below) have put out a statement that reads:

The Australian retail, farming, grocery and beverage sectors contribute more than $311bn to the economy each year, and account for approximately 15 per cent of the total workforce in Australia.

Our industries understand that obesity is a public health problem in Australia, and that it is appropriate for calls to be made for Australians to modify and improve their dietary intake.

However, it is not beneficial to blame or tax a single component of the diet.

Obesity is a serious and complex public issue with no single cause or quick-fix solution. A new tax is not the way to make our nation healthier.

The McKinsey Global Institute, for instance, classifies taxation as one of the least effective obesity interventions, with ‘No direct evidence for change in weight or change in consumption or physical activity levels’[1].

In fact, consumption trends show that the change such a tax seeks to effect is already happening.

Recent Australian Bureau of Statistics (ABS) data indicates a decline in added sugar intake over time, yet obesity rates continue to climb[2].

As a food supply sector, we recognise that we have a role to play in improving the food choices available for the Australian consumer.

We will continue to:

  •  Promote and support healthy balanced lifestyles that involve responsible eating habits and regular exercise;
  •  The Develop and provide clear and meaningful fact-based nutrition information and labelling, providing the information people need at point of purchase to make appropriate decisions for the occasion;
  •  Increase the availability of products with fewer kilojoules, including more reduced, low- and no-kilojoule product offerings, as well as more packaging options and smaller portion sizes;
  •  Ensure certain products are not marketed to children and comply with canteen guidelines;
  •  Support physical activity and nutrition programmes, contributing to the research and evidence base and developing partnerships that advances nutrition science;
  •  Defend the interests of our sugarcane farmers, who provide vital jobs and support in regional and rural Australia.

We are committed to working with public health groups, Non-Government Organisations, and government to make positive changes to the food supply into the future.

We welcome a conversation on establishing a broad and holistic approach to tackling obesity.


[1] McKinsey Global Institute, Overcoming obesity: An initial economic analysis, November 2014.

[2] Australian Bureau of Statistics, Australian Health Survey: Consumption of Added Sugars, April 2016.

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