FOI Seminar 3 February 2012

Abdulfatah Sheikhbihi Adam (FOI):

 

The effect of a size differentiated tax on soft drinks

(with Sinne Smed)

 

Friday 3 February 2012, 12.30-12.30, Building A, first floor (the B.S. Jørgensen seminar room)

Abstract:

Monthly data from GfK Consumerscan Scandinavia for the years 2006 – 2008 are used to estimate the effects of different tax scenarios on sugar sweetened beverages (SSB’s). Most studies fail to consider demand interrelationships between different types of beverages when the effect of a taxation is evaluated. Furthermore studies fail to consider the substitution possibilities that consumers have to substitute to larger container sizes or discount brands when a tax is levied, both which give considerable value for money to the consumer.

To add to the literature in this aspect we estimated a two-step censored dynamic almost ideal demand AIDS. Three different taxes is considered, a tax based on the content of added sugar in the various SSB’s, a flat tax on soft drinks alone and a size differentiated tax on soft drinks that remove the value for money obtained by large sixe purchasing. The scenarios are scaled equally in terms of obtained public revenue. Larges effect in terms of reduced intake of calories and sugar are obtained by applying the tax on sugar in all beverages, whereas the unified and size differentiated scenarios gives comparable, but much smaller effects. The latter is due to large increases in the consumption of other SSB’s in reaction to the tax.