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The fizzy drink tax debate

MuratFeatureObesity is a looming problem in New Zealand, one that needs a comprehensive approach supported by debate and robust research. One strategy requiring further community discussion now is a tax on fizzy drinks, which New Zealand studies are already showing could potentially prevent around 67 deaths a year.

Murat is part of a University of Otago collaboration with the National Institute for Health Innovation at the University of Auckland on a major project looking at the effects of health taxes and subsidies, to test what impact such a tax would have on the health of New Zealanders. This research is funded by the Health Research Council.

The World Health Organisation recommends a daily intake of free sugars as less than 10% of total energy intake, but suggests a further reduction to below 5% (roughly 25 grams or 6 teaspoons) per day would provide additional health benefits.

Data that quantifies the impact of price changes on consumption of sugar in New Zealand will help to encourage and inform the debate and provide the evidence policy makers need to base informed decisions on the impact of a tax strategy.

Otago Business School Economics researcher Dr Murat Genç says the research team’s studies into understanding price elasticities to inform public health research and intervention is already producing proof that price influences consumption of unhealthy food.

The research, published in the New Zealand Medical Journal, is producing local data that aligns with those of international studies, including research published in the British Medical Journal, which suggest that a sales tax on sugar-sweetened drinks could reduce obesity, improve health and probably reduce inequalities.

Preliminary research findings show that a 20 percent tax on fizzy drinks would reduce energy consumption by 0.2 percent or 20kJ a day. Just reducing sugar consumption by that amount would help avert or postpone about 67 deaths from cardiovascular disease, diabetes and diet-related cancers a year.

This suggests a 20% tax on carbonated drinks could be a simple, effective component of a multi-faceted strategy to tackle New Zealand’s high burden of diet-related disease.

Carbonated drinks account for 1.8% of average household food expenditure in New Zealand (approximately $166/year based on 2009/10 data). Given there are 1.55 million households (2013 census data) total national expenditure on carbonated drinks is in the region of $257 million each year.

The model Dr Genç and his colleagues have developed estimates the effect of a 20 percent tax on consumer purchasing behaviour. “We were interested in understanding exactly what effect changing prices have on food expenditure – i.e. if resistance to purchase moves in alignment to the size of the increase.”

The model compared price variations with food expenditure data from national Household Economic Surveys along with disease-specific mortality rate information.

Their current research is conducting an experiment using a “virtual supermarket” to generate larger price variations that are not possible to have with observational data. This means that estimates based on the respondents’ behaviour can be more reliable.

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