WHO seeks 20 percent tax hike on sugary drinks: Will countries listen?

The World Health Organization on Tuesday urged countries to introduce higher taxes on sugary drinks in an effort to cut down on soda consumption. 

First Look

The World Health Organization (WHO) is urging countries around the world to raise taxes on sugary drinks such as soda in an effort to reduce rates of obesity and diabetes. 

In a report published Tuesday titled "Fiscal Policies for Diet and Prevention of Noncommunicable Diseases," WHO calls for countries to increase the retail prices of sugary drinks by 20 percent through taxation, saying that a proportional drop in consumption would result. 

"We are now in a place where we can say there is enough evidence and we encourage countries to implement effective tax policy," said Temo Waqanivalu, coordinator at WHO's department of noncommunicable diseases and health promotion, in a press briefing. 

But whether countries will heed the WHO's advice remains to be seen. In addition to countries, and number of US cities and states have grappled with the question of whether to raise taxes on sugary drinks in recent years, with experts in disagreement over the effectiveness of such a move in reducing soda consumption. Furthermore, some argue, such taxes give the government too much control over citizens' drinking habits and disproportionately affect families living in poverty. 

Taxes on sugary drinks have begun to grow in popularity around the world, as researchers link soda consumption to global health issues such as obesity and diabetes. Britain announced earlier this year that it would tax companies that sell sugary soft drinks and invest the money in health programs for school children, joining a number of other European countries. 

"Data on the effectiveness of these measures, while not always robustly evaluated, suggests that reductions in sales have been seen as a result of the imposition of taxes in Norway, Finland, Hungary, France, and Mexico," the British government’s health advisory group, Public Health England, reported in 2015.

Public Health England and other supporters of such taxes also cite as an example Mexico, which claims to have experienced a 6 percent decline in purchases of sugary drinks after introducing a 10 percent tax in 2013. 

But while taxes on sugary soft drinks have spread around the world, they have failed to pass in most American cities. Berkeley, Calif., became the first US city to introduce such a tax in 2014, followed by Philadelphia in June. But they did not pass without a fight: some experts argue that the effectiveness of these taxes is debatable. 

"One important reason taxes don’t cut consumption much is that the taxes are often set too low to affect behavior," writes William Shughart II, professor in public choice at Utah State University’s Jon M. Huntsman School of Business, for The Wall Street Journal. And setting taxes higher, Professor Shughart continues, could lead to a soda black market or people simply crossing the border into another city or state where taxes are lower. 

Others raise moral objections to these taxes, as many opponents argue that it isn't the government's job to control what people eat and drink. To minimize these concerns, Philadelphia took a different approach to getting its tax passed, as the Christian Science Monitor's Lonnie Shekhtman reported: 

This is why Philadelphia Mayor Jim Kenney focused his soda-tax campaign on its fundraising potential instead of on health implications associated with sugar. The city needs to restock its depleted coffers, which Mayor Kenney attributes to the city's success in defeating the soda industry's anti-tax campaign.

"If you want to tax something and people know where the money's going to go, then it's easier for them to get behind it," Kenney told Reuters.

The measure is projected to raise $91 million in its first year. Kenney has pledged to spend the money on public programs such as universal pre-kindergarten. 

Other moral opponents of soda taxes, such as Sen. Bernie Sanders (I) of Vermont, point out that they disproportionately affect low-income families.

But soda consumption overall in the United States has been on a steady decline over the past 11 years, reaching its lowest point of sales in the past 30 years in 2015, as consumers seek out healthier alternatives, Fortune magazine reported earlier this year.

Three more cities in the US – San Francisco, Oakland, and Boulder, Colo. – will vote on similar taxes in November.

This report contains material from Reuters.