In Focus: Proposed Sugar Tax
Words by Jóhann Páll Ástvaldsson
In an effort to improve public health, the Icelandic government plans to impose a sugar tax of 20% on products such as candy, chocolate, and sweetened soft drinks. The proposed tax is meant to discourage Icelanders from consuming sugary products – which they do more of than any of their Nordic neighbours. Sweetened soft drinks are a particular culprit: it is estimated that they are responsible for one third of the added sugar in Icelanders’ diets. The impending tax is not without its critics, however, who believe it’s a tad too authoritarian for the state to meddle with individuals’ dietary choices.
Taxing for health?
One of the stated goals put forth by Iceland’s current government in 2017 is to inspect economic incentives to improve public health. The goal ties in with a new action plan from the Directorate of Health to fight obesity in Iceland, spearheaded by Minister of Health and Left-Green Movement MP Svandís Svavarsdóttir. The sugar tax is the first of 14 steps in the Directorate’s plan, which also includes initiatives such as offering healthier food choices in schools, sports complexes, workplaces, and the community at large. The plan also proposes a ban on marketing unhealthy food to children. The hefty sugar tax suggested by the action plan is meant to reduce sugar consumption among the public. If the tax is approved, Iceland will follow in the footsteps of countries such as Ireland, France, Norway, and Mexico.
Sugar and spice don’t make it nice
Excessive sugar consumption has been pinpointed as a serious public health issue in Iceland, a country with a notorious sweet tooth. Diet is considered one of the main risk factors for Icelanders’ morbidity. According to a 2013 Directorate of Health report, about 21% of Icelandic adults had a Body Mass Index of 30 or greater, while 5% of children were categorised as overweight. Soft drinks accounted for 34% of the sugar consumption of Icelanders between 2010 and 2011. In a 2018 survey, it was revealed that 20% of adults consumed carbonated drinks, both with and without added sugar, one or more times a day. Such findings led the Directorate of Health to the conclusion that greater measures need to be taken to encourage Icelanders to eat healthier.
Mixed (sugar) bag
Iceland implemented a short-lived sugar tax of 5% from March 2013 to January 2015. It was eventually repealed due to heavy criticism. That time around, the cost of sweetened soft drinks rose by only ISK 5 ($0.04/€0.04) per litre, far from enough to repel consumers. The implementation was a failure when it came to chocolate, which actually lowered in cost, as the sugar tax replaced pre-existing taxes which had been higher. Unsurprisingly, consumption of sugar-rich products did not decrease, and as a consequence the government filled its coffers with ISK 200 million ($1.58m/€1.4m) more than they had expected from the initiative.
This time around, a 20% sugar tax has been suggested, in order to achieve a profound change in price which consumers of soft drinks and sweets can feel in their wallets. As of now, soft drinks are categorised in a lower tax bracket, at 11% VAT. The proposal suggests moving them to the higher 24% VAT category, and implementing an additional tax which would result in a 20% price hike for consumers overall.
The government’s proposal has not been taken to kindly by the public. Detractors of the tax have suggested that the move is not an incentive, rather a fine. Ólafur Stephensen, Director of the Icelandic Federation of Trade, has his doubts about the idea. Ólafur says the sugar tax is a step backward from recent efforts which have streamlined food taxation in the country, to the benefit of both consumers and businesses. Ólafur, along with many others, also criticises the tax’s prescriptive nature. “It’s so incredibly difficult when governments are starting to decide what is healthy and what is unhealthy for us, changing the price of things in order to control consumption. If taxes are to be applied to this end, then there should be high taxes on TVs and low taxes on running shoes.”
The Icelandic Association for Body Respect has criticised Health Minister Svandís Svavarsdóttir for encouraging prejudice against fat people in her discussion of the proposed sugar tax. “Icelanders of all ages and of all genders, sizes, and shapes consume sugar. An excessive consumption of sugar is not just unhealthy for fat people,” part of their statement read. Svandís responded to the criticism by saying “It has consistently been pointed out that Iceland has a high proportion of fat people and that the consumption of sugary products increases the likeliness of obesity and tooth decay and high consumption of sugary sodas and beverages can additionally increase the likelihood of type 2 diabetes.”
Does taxation work?
It remains to be seen whether the taxation of sugar will be implemented, and whether it will be a success this time around in Iceland. According to a 2016 World Health Organisation report, taxation of sugar is one of the most effective ways to reduce its consumption. However, the tax needs to be reasonably high to have any effect. The WHO’s suggested figure was, in fact, 20% – the same number proposed in Iceland, as a 20% percent tax can reduce consumption by close to 20%.
Results from Berkeley, California as well as Mexico point towards a sugar tax having some effect. A 2016 report from Mexico showed that a sugar tax implemented in 2014 led to a 12% decrease in soft drink consumption in the first year. In Berkeley, an ISK 40 ($0.32/€0.28) per litre fee was placed on drinks with added sugar. Consumption of those drinks decreased by 26% as water consumption rose. However, in nearby control cities San Francisco and Oakland, consumption of drinks with added sugar rose 10% and 19% respectively in the same time frame.
The Icelandic state placed a hefty tax on tobacco in 2013 which decreased consumption levels heavily. However, tobacco is significantly pricier than soft drinks and sweets, so consumers may have a better eye for price in that department. The sugar tax’s detractors have pointed out that the nation is already moving away from soft drinks on its own: their market share has decreased from 48% to 42% in Iceland between 2016 to 2019, as folks opted more for soda water.
According to the Directorate of Health, informing consumers as well as encouraging folks to opt for healthier choices is simply not enough to decrease the public’s sugar consumption. There is some evidence for taxation working, but Iceland’s last attempt shows that careful implementation is the key to success. One thing is clear: the sugar consumption levels in the country remain relatively high compared to those of Iceland’s neighbours, and they affect Icelanders’ health. Yet the question remains: does the state have a right to control the public’s consumption habits? And can the public be trusted to make their own decisions?
This article appears in the latest issue of Iceland Review Magazine. Subscribe here to get the magazine delivered to your door.
Iceland Review is the longest-running English-language magazine, presenting Iceland’s community, culture, and nature since 1963.