Published On: Thu, Oct 29th, 2015

Soda tax in Mexico: What’s good for public health, can be bad for public finance

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Tax expert, analyst and Forbes Magazine contributor, Mr. Joseph Thorndike says Mexico is having second thoughts about the soda tax … Shouldn’t we all?

Last year, Mexico imposed a stiff new tax on sugary drinks. And according to the early data, it’s working: The 10 percent tax seems to have cut soda consumption by about 6 percent.

You’d think results like that would embolden Mexican lawmakers, encouraging them to stand firm – or even double down – on their commitment to public health through punitive taxation.

But you’d be wrong. Mexico’s lower house of Congress recently approved a measure to cut the soda tax, at least for drinks with reduced sugar. The revision would reduce the tax by 50 percent for products with less than five grams of sugar per 100 milliliters.

Supporters of the tax cut say it will encourage manufacturers to offer more low-calorie products. Public health advocates, however, are not convinced. “This measure weakens the tax and could weaken its effects,” one official of Mexico’s National Institute of Public Health told The Guardian. “The way to safeguard public health is to increase the tax … then reduce it on the products that have less sugar.”

(Image: konsumption.com)

(Image: konsumption.com)

Cynics say the tax cut was engineered by the beverage manufacturers. And maybe the cynics are right. But it’s also possible that Mexican lawmakers are starting to have second thoughts about the soda tax. And even if they aren’t, they should be.

Fans of taxing soda – including, most recently, celebrity chef Jamie Oliver – promise that it will slow the obesity epidemic afflicting so many countries. But voters in the United States have been notably cool to the idea. Plans to tax soda have failed repeatedly in jurisdictions around the country. So far, only Berkeley, California has actually enacted one.

Fans of the soda tax attribute their losses to the power of Big Soda – the handful of powerful beverage companies that consistently oppose the levy. And there’s something to that explanation. Certainly, drink manufacturers have poured a lot of money into the fight.

But there’s another reason the soda tax keeps failing: it’s a bad idea. The tax is well-intentioned and maybe even effective at curbing soda consumption (although I’m dubious about its ability to combat obesity). But what’s good for public health can be bad for public finance.

 

Source: http://www.forbes.com/

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  1. Alan Oslick says:

    “…there’s another reason the soda tax keeps failing: it’s a bad idea.” A nonsensical comment, even with regard to tax revenues, as M. Chehuan points out in his comment.

    Fortunately for the Mexican people, the Mexican Senate rejected the lower chamber’s submission to Coca Cola et al. The IEPS on sugar stays at 10%.

    Unfortunately, most Mayans in rural peninsula villages do not have ready access to potable water, and may be relying on Coca Cola as their beverage.

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