(Yicai) Oct. 14 -- Chinese scholars have told Yicai that the country should begin seriously considering a tax on sugar-sweetened beverages as it prepares to introduce mandatory nutrition labelling for prepackaged foods from next March.

The scholars generally agreed that a sugar tax should not be viewed as a penalty on businesses, but as a policy tool to encourage the beverage industry to move towards healthier and more sustainable products. They cited international studies suggesting that such taxes do not cause widespread harm to industries or employment.

Without timely policy reforms and action about 60 percent of adults worldwide, or 3.8 billion people, and 31 percent of children and adolescents, or 746 million people, will be overweight or obese by 2050, according to research published in The Lancet, a medical journal. As obesity and associated illnesses such as diabetes and cardiovascular disease become more pressing public-health concerns, nearly 120 countries have introduced taxes on sugar-sweetened beverages.

The time is ripe to study how taxation can guide consumers and the beverage industry toward reducing sugar consumption, Zheng Rong, a professor at the University of International Business and Economics and director of the World Health Organization’s Collaborating Center for Health Tax and Fiscal Policies, said in a recent interview with Yicai.

The WHO has called on governments to use health taxes to raise the inflation-adjusted prices of tobacco, alcohol, and sugary drinks by at least half by 2035. The initiative aims to curb chronic diseases while generating additional public revenue.

China’s consumption tax is the country’s third-largest source of tax revenue, yet sugar-sweetened beverages remain outside its scope. Research done by Zheng’s team estimates that a tax that raised retail prices of these drinks by 20 percent or 30 percent could generate CNY170.2 billion (USD25.4 billion) or CNY236.4 billion (USD35.3 billion) in consumption tax revenue, the equivalent of around 10 percent to 14 percent of the country’s total consumption tax revenue last year.

“Research findings indicate growing support among Chinese consumers for taxation and an increasing willingness among beverage producers to voluntarily reduce sugar content,” Zheng said. “Meanwhile, health and finance authorities face growing pressure to boost healthcare spending and broaden their sources of revenue.

“With mandatory sugar labelling on food packaging due to begin next year, the conditions for taxing sugar-sweetened beverages are becoming increasingly favourable,” he pointed out.

International experience, such as the case of the United Kingdom, shows that governments often give businesses around two years to adapt before a sugar tax on drinks takes effect, giving them ample time to invest in reformulating their products. Indeed, more than half of manufacturers rework their beverages within two years of legislation being announced.

Several countries, including Belgium, France, the Philippines, the United Arab Emirates, Saudi Arabia, Lithuania, and Mexico, have already expanded the scope of their sugary drinks taxes to include those containing sugar substitutes.

Zheng argues that a Chinese sugar tax should cover at least two categories: mass-produced canned beverages and drinks prepared fresh for consumers. Dairy products and powdered instant coffee beverages should also be included, he said.

While the upcoming labelling rules mainly target pre-packaged beverages, freshly prepared drinks like milk tea and fruit tea — major sources of added sugar intake for children and adolescents — should also be brought under regulatory oversight, according to Ma Guansheng, a professor at the Peking University School of Public Health.

The authorities should track changes in drinks formulations and children’s beverage consumption patterns, while introducing measures to help the industry reduce sugar and encouraging producers to lower the baseline sugar content of their products, Ma added.

Editor: Tom Litting