Germany mulls sugar tax: What's the best approach?

Obesity and diabetes are on the rise worldwide. In Germany, around half of all adults are now slightly overweight, almost one in five is obese. More than 7% of the German population have diabetes and numbers are rising. Excessive sugar consumption causes illness and is a burden to the public purse: When individuals are too sick to work, health insurance costs increase.

That's why attention has now turned to the impact of sugary beverages. The consumption of soft drinks, colas, energy drinks and the like are seen as a main factor in the rise in obesity worldwide.

The World Health Organization (WHO) has long since recommended that such drinks be taxed. Germany's Minister of Education Cem Ozdemir of the Greens, backed by nine of the country's 16 federal states, favors the idea. The states are now calling on Germany's federal government to consider introducing a sugar tax.

Plenty of benefits

According to a November 2023 study by Munich's Technical University, a special tax on sugary drinks could be very effective.

Researchers calculated that the measure could prevent up to 240,000 Type 2 diabetes cases over the next 20 years. It could also help avoid or significantly reduce the likeness of 17,000 to 30,000 deaths, scientists projected.

A total of up to €16 billion ($17 billion) could be saved in this period, researchers found, while €4 billion ($4.2 billion) alone could be saved in the healthcare system, as more cases of obesity-related illnesses could be avoided.

Overall, the German workforce would be blighted by fewer sick days and there would be fewer illness-related early retirements and deaths among the working-age labor force. Indeed, the German economy as a whole would benefit from a sugary drinks tax.

A levy of this sort can lower the body mass index of children and young people in particular, a recent study by Seattle's University of Washington involving some 6,000 subjects found. Teenagers are more likely to consume sugary drinks, researchers at Munich's Technical University point out, meaning that a tax could result in added health benefits in this age group.

How other countries are dealing with sweet foods and drinks

Over 50 countries worldwide have already introduced a soft drinks tax, including the UK, France, Spain and Poland, as well as India, South Africa, Chile and Saudi Arabia. Here are some examples:

Obesity is a global problem, but taxes could incentivize healthier lifestylesImage: Lindsey Parnaby/AFP

Norway

Norway started taxing sweet foodstuffs many years ago, introducing its first ley in 1922. It applies to sugar and artificial sweeteners. Ironically, neighboring Sweden indirectly benefits from this tax, as many Norwegians like to cross the border to buy cheaper chocolate there. In 2018, the Norwegian government raised the tax by around 80%, prompting a drop in the sale of soft drinks.

Mexico

Mexico began taxing sugary soft drinks at 1 peso (€0.50) per liter in 2014. This corresponds to a tax burden of around 10%. The levy caused a drastic drop in the sale of sweet soft drinks in the following year and was considered a success story for many years. Many consumers, however, have since switched to fruit juices and sweetened dairy products, which are not subject to the sugar tax, partially undermining its health benefits.

India

India placed drinks with added sugar in its highest tax category. All drinks that have sugar added during production fall in this bracket. Consumers pay 28% in tax, as they do for luxury cars and tobacco products. This has driven up the price of these beverages, causing a drop in sales. Authorities have not, however, incentivized producers to reduce the amount of sugar in their drinks and as such they are still being sold.

Two-tier tax system

Germany may draw inspiration from the British model of taxing sugary foods. In 2018, the UK government introduced a two-tier system: 18 pence in tax must be paid per liter for five grams of sugar per 100 milliliters, and 24 pence in tax for eight grams or more. While this led to a rapid reduction in the consumption of sugary drinks it also created an incentive for manufacturers to significantly reduce the sugar content of their soft drinks. As a result, many producers have reduced beverage sugar levels.

Sweet snacks like cake should be consumed in moderationImage: Winfried Rothermel/picture alliance

In Germany, manufacturers have been encouraged to lower the sugar levels in drinks voluntarily: This has had little effect to date. On average, manufacturers have reduced the sugar content of soft and energy drinks by a mere 2%. Countries with tiered sugar taxes have fared better. The UK, for example, saw the sugar content in soft drinks fall by an average of 29% in the first three years.

Researchers at Munich's Technical University have shown that taxing manufacturers according to the amount of sugar in their products is most effective.

This article was translated from German