۱- Introduction

۲- The Catalan Tax on sugar-sweetened drinks

۳- Data

۴- Econometric strategy & results

۵- Conclusions

References

Abstract

In this paper, we analyze a tax on sugar-sweetened beverages (SSB) that was introduced in Catalonia on May 1, 2017. The Bill established the requirement of a 100% pass-through of the tax to the final consumer and two levels of the tax: 0.08 euro/liter for products with 5-less than 8 g of sugar and 0.12 euro/liter for products with 8 g of sugar or more. Previous literature focusing on the impact of SSB taxes finds that pass-though is only complete in the long-term. Our paper provides new evidence that, when the tax increases prices substantially and immediately, the sales response is also significant. In particular, we estimate that the new SSB tax in Catalonia reduced SSB purchases by 7.7%. We document that part of this reduction is substituted by an increase in sales of zero/light drinks (substitution effect). Importantly, the reduction in purchases is stronger in areas with a higher incidence of obesity, in areas with higher household incomes and for products with higher sugar content.

Introduction

In most developed countries, the incidence of overweight and obesity is growing very rapidly. In OECD countries, 54% of the adult population was overweight in 2015, and approximately 19.5% of the population was obese (see Figs. 1 and 2 below, OECD Health Statistics, 2017).1 Furthermore, these conditions are a growing concern not only for the adult population but also for children.2 Higher overweight incidence among children is worrying because it will entail increases in public health problems in the future. Indeed, OECD projections show a steady increase in overweight prevalence until at least 2030 (OECD, 2017). Consumption of sugar is considered to be one of the driving causes of the growing overweight and obesity incidence (Te Morenga et al., 2012), and part of the sugar consumption and its associated excess caloric intake comes from the consumption of sugar-sweetened beverages (SSBs).3 Block (2004) reports that the number one contributor of energy intake is soft drinks, which contributes 7.1% of energy intake in two representative surveys in the United States. In a meta-analysis summarizing the results of 32 studies, there is evidence from cohort analysis showing that an increment of one daily serving of SSBs is associated with a 0.22 kg weight gain in adults over one year (Malik et al., 2013). Furthermore, there is increasing evidence showing the direct link between the consumption of SSBs and numerous health problems, such as increased risk of cardiovascular diseases (coronary heart diseases and strokes, Bechthold et al., 2017), increased risk of hypertension (Schwingshackl et al., 2017), and diabetes 2 and metabolic syndrome (Malik et al., 2010). In a recently published paper using a large prospective cohort of more than 100,000 participants, the consumption of sugary drinks is found to be associated with increased risk of overall cancer and breast cancer (Chazelas et al., 2019).