A ‘sugar tax’ for health promotion raises concerns about across-the-board price increases for soft drinks and snacks···in the end, the burden on ordinary people may grow

President Lee Jae Myung has reignited debate over introducing a so-called ‘sugar tax’ by mentioning the imposition of a Health Promotion levy on sugar-sweetened beverages, a main cause of obesity and diabetes. While the policy is justified as promoting health, critics counter that it could stoke inflation and be regressive by increasing the burden on low-income households.

According to relevant ministries on the 28th, the Health Promotion levy mentioned by the president is distinct from taxes that the state or local governments compulsorily collect from citizens to cover necessary expenses. Unlike general taxes, which fund overall government operations, the levy is strictly limited to ‘health promotion’ purposes such as supporting healthy lifestyles, nutrition management, and expanding public healthcare facilities.

For proponents of introducing a sugar tax, the primary reason is health promotion. The argument is that sugar contributes to chronic conditions such as tooth decay, obesity, and cancer.

The issues are inflationary pressure and tax regressivity.

From consumers’ perspective, any increase in product prices will likely be perceived as a kind of ‘quasi-tax’. If higher costs are fully passed through to retail prices, not only carbonated drinks but related product categories could see prices rise in succession.

In the 21st National Assembly, a proposed ‘Partial Amendment to the National Health Promotion Act’ submitted by then-Democratic Party lawmaker Kang Byung-won would have imposed up to 28,000 won per 100ℓ depending on sugar content. Based on 1ℓ of cola containing 11 g of sugar per 100㎖, the levy would be about 110 won. In a review report at the time, the chief expert of the National Assembly’s Health and Welfare Committee noted that “it is positive in terms of encouraging improved eating habits and securing funding for disease treatment,” but also pointed out that “if a levy is imposed on sugar, which has the character of a basic daily necessity, the cost will inevitably be passed on to consumers.” The Ministry of Agriculture, Food and Rural Affairs, the relevant ministry, also stated that “introducing a levy on sugar-sweetened beverages could become a factor driving inflation as the food industry passes the added costs on to consumer prices, so careful review is needed.”

A ‘balloon effect’ toward high-sugar processed foods cannot be ignored. In cases where sugar-sweetened beverages (SSB) were taxed, such as Philadelphia and Seattle in the United States, consumption of substitutes like snacks increased, or people increasingly purchased beverages in bulk in other areas to avoid the tax.

The scope of collection is also contentious. Opinions diverge on whether to apply it only to carbonated drinks with high sugar content or to broaden it to sugar-based processed foods across the board, such as snacks and bread.

Among countries that have already introduced a sugar tax, the taxable items vary. Since 2011, France has levied a tax proportional to the sugar content in sugar-sweetened beverages such as Coca-Cola. Norway taxes not only beverages but a wide range of processed foods containing sugar, including chocolate and candy. Colombia, which introduced a health tax in 2023, taxes ultra-processed foods such as sugar-containing beverages, cocoa-containing products, breakfast cereals, ice cream, condiments, and spices.

Regressivity, whereby the burden on low-income households grows relatively larger, is another problem. Critics argue that low-income households, who rely more on inexpensive sugar-sweetened beverages, would shoulder a greater tax burden relative to their income. Because healthier substitutes such as unsweetened drinks and organic juices tend to be more expensive, low-income households with fewer choices end up paying more tax.

Lee Sang-min, a senior research fellow at the Nara Salim Research Institute, said, “When a tax is attached to a particular item, people naturally buy substitutes, which can end up doing nothing but distorting the market,” adding, “Because a sugar tax could increase the burden on low-income households, the discussion should proceed with caution.”

Some argue that introducing a financial investment income tax is more urgent than proposing a sugar tax. People’s Solidarity for Participatory Democracy pointed out that “you cannot ensure tax justice or fiscal sustainability by touting a new consumption tax while turning a blind eye to taxable financial income.”

However, there is also a counterargument that, in the long run, it could better support the health of low-income households. A 2021 report by the Korea Institute of Public Finance found that in Colombia, a tax on sugar-sweetened beverages reduced the overweight rate among low-income groups by 1.5∼4.9 percentage points and the obesity rate by 1.1∼2.4 percentage points. An official at the Korea Institute of Public Finance said, “The price elasticity of a sugar-sweetened beverage tax is higher among low-income groups than among high-income groups, so the effects of reducing obesity and weight could be greater for the low-income. This supports a counterargument that, from a health equity perspective, it is desirable.”

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