Expert Calls for Consumption Tax on Soft Drinks to Improve Health and Boost State Revenues

The Czech population is experiencing a rise in obesity rates, with more than a quarter of children and adolescents now overweight or obese – twice as many as twenty years ago. One of the contributing factors is the high consumption of sugary beverages. Researchers from PAQ Research propose that implementing a consumption tax on these beverages would reduce their consumption and, consequently, obesity rates while also bringing in billions of Czech koruna in revenue for the state.

According to PAQ Research, the proposed tax rates for individual beverages should be based on the amount of sugar they contain. The research agency suggests introducing a tax of 3.40 Czech koruna per liter for drinks with a sugar density of 50 grams per liter. An extra 0.35 Czech koruna would be added for every additional ten grams of sugar. Thus, a liter of a beverage with 72 grams of sugar would be taxed at 4.45 Czech koruna. Beverages containing at least one artificial sweetener would be subject to a tax of one Czech koruna per liter.

Similar taxes have already been implemented in twelve European countries, including Finland, Belgium, France, the United Kingdom, and Poland. The detailed taxation system used in Poland was chosen as a model for this proposal. Economist Jakub Komárek, one of the study’s co-authors, highlights the positive impact of such taxes on reducing the consumption of sugary beverages, particularly among the young.

The study identifies sugary beverages as one of the primary sources of sugar in the Czech diet. On average, a single soda, cola, or energy drink contains 40 grams of sugar, equivalent to ten teaspoons. The World Obesity Federation estimates that the annual cost associated with obesity and overweight-related issues in the Czech Republic exceeds twelve thousand Czech koruna per capita.

Martin Haluzík, chairman of the Czech Society for Obesity and head of the Diabetes Center at IKEM, agrees that the tax could contribute to reducing obesity rates. However, he emphasizes that additional measures would be required, as consuming sugary beverages is not the sole factor influencing obesity. Haluzík suggests that the tax could lead to a 20% decrease in the consumption of sugary beverages and generate approximately 2.7 billion Czech koruna in annual revenue. Moreover, it could save the healthcare system 80 to 90 billion Czech koruna over the lifetime of the current population.

While Veronika Jakubcová, executive director of the Union of Non-Alcoholic Beverage Producers, acknowledges that price increases logically result in reduced consumption, she also points out potential negative consequences. These include decreased profits, lower tax revenues, and possible job losses. Jakubcová argues that the proposed tax unfairly discriminates against beverage producers since confectionery, cookies, cakes, and pastries are the primary contributors to free sugar intake.

Komárek disagrees with the notion that such taxes have adverse effects. He cites the example of the United Kingdom, where the introduction of similar taxes led to increased sales of less sugary beverages.

The issue of implementing a consumption tax on sugary beverages was discussed within the coalition while considering an austerity consolidation package. Ultimately, it was agreed that these beverages would be subject to a higher value-added tax rate. Jakub Michálek, leader of the Pirate Party parliamentary group, points out that this decision aimed to avoid complicating the tax system further. However, Daniel Prokop, sociologist and co-author of the study, disagrees with this justification, as the administrative costs associated with the tax in the United Kingdom amount to only 2.4% of annual revenue, with administrative expenses accounting for approximately 0.6%.

While the Ministry of Finance stated that the consolidation package has been finalized and introducing a consumption tax is not currently planned, Michálek suggests that the matter is not entirely closed. He mentions that an analysis will be conducted, and further discussions will take place based on its findings. He emphasizes that, like alcohol and tobacco, sugary beverages have hidden costs that amount to billions of Czech koruna.