Canada’s first soda tax is unlikely to 'solve' obesity

One reasons the tax might not work is because margins for the drinks are so high that manufacturers can easily absorb the cost of a tax and keep the price the same.

The National Post 4 minute read October 26, 2021

There is mixed evidence that soda taxes are a direct harbinger of a thinner and healthier population. Timothy A. Clary/AFP/Getty Images

After years of being pitched as an urgent solution to the obesity crisis, Canada’s first soft drink tax is finally coming to Newfoundland and Labrador — but the policy is already getting pushback from some unlikely sectors.

Although the 20-cent-per-litre tax was framed by legislators as a milestone towards becoming “one of the healthiest provinces in Canada,” critics have argued that it may do surprisingly little to combat obesity, while imposing disproportionate costs on rural communities where soft drinks are one of the only reliable forms of hydration.

Last week, Newfoundland and Labrador announced that by next September, residents will be paying a tax of 20 cents on every litre of “sugar sweetened beverages.” This means that the average can of Pineapple Crush, a Newfoundland favourite that is largely unavailable in other markets, will be taxed at a higher provincial rate than gasoline, which is taxed at 14.5-cents-per-litre.

Sara Kirk, a professor of health promotion at Dalhousie University, said upon announcement of the new tax that it wasn’t a guarantee that pricier soda would inevitably make for healthier Newfoundlanders and Labradorians.

“Context matters; there’s different ways of doing it,” Kirk told the National Post, adding that the tax’s best chance at effectiveness is if its revenue is devoted towards measures that increase education and the availability of healthier alternatives.

In August, food security researcher Nathan Sing penned an article for Maclean’s noting that more than 200 communities in Newfoundland and Labrador are under a boil water advisory. It’s why many rural residents in the province disproportionately rely on packaged drinks for their hydration, with soda often being the cheapest option.

Wrote Sing, the tax was likely to be disproportionately borne by lower income people “in rural communities whose cheapest and most abundant sources of hydration are laden with sugar.”

Newfoundland and Labrador has Canada’s highest rates of both adult and childhood obesity. According to Statistics Canada data from 2018, 40.2 per cent of the province’s adult population is considered obese. Among those aged 12 to 17, the obesity rate is 36.4 per cent — far higher than the Canadian national average of 27.9 per cent.

Although province-specific statistics on soda consumption are not available, Canadians as a whole consume the equivalent of 110 litres of soft drinks per person, per year.

It’s generally a good bet that making something more expensive will reduce its consumption. A 2020 article in the British Medical Journal, for instance, looked at evidence from a Mexican soda tax and found that it had driven reduced consumption of sugary beverages.

But there is mixed evidence from around the world that soda taxes are a direct harbinger of a thinner and healthier population.

New Zealand looked at the possibility of implementing a nationwide soda tax in 2017, but after reviewing evidence from other soda-taxed jurisdictions, they concluded that either soda consumption would barely go down, or it would be cancelled out by Kiwis getting their sugar fix in other areas.

“The evidence that sugar taxes improve health is weak,” concluded an analysis by the New Zealand Institute of Economic Research.


Sylvain Charlebois, a Halifax-based food researcher, wrote in a June analysis of the tax that one of the reasons soda taxes might have such a mixed record is because margins for the drinks are so high that manufacturers can easily absorb the cost of a tax and keep the price the same. “The sugar tax is simply just absorbed by the supply chain,” he wrote.

Although the average 355 ml can of Coca-Cola can cost upwards of $1.50 in a vending machine, the raw production cost can be lower than 10 cents per can. It’s thanks to these large margins that Coca-Cola was famously able to keep the price of its product fixed at five cents for 73 years from 1889 to 1959.

Charlebois also noted that Canadian consumption of soft drinks has been trending downwards for years, in large part due to the simple fact that Canadians are voluntarily swapping out soda for healthier alternatives.

“In the end, education may be the most powerful tool we have,” he wrote.