Public Health, Sugar, and Taxes

There are still some doubts about the strategies that can be taken to reduce exposure to substances harmful to health when consumed in excess, as is the case with sugar.

Specifically, fiscal measures and other options that allow for changes in the food environment where people live and shop.

Portugal was one of the pioneering countries in the implementation and evaluation of these measures, and there is currently sufficient information for an initial reflection on these intervention models, which support public policies in the food sector.

Introduction

Let's begin with the historical evolution of thought on measures to reduce sugar consumption and some public health reasons that justify reducing its consumption in the Portuguese population.

Since the creation of the National Program for the Promotion of Healthy Eating (PNPAS) in 2012, the taxation of certain foods, such as sugar or salt, has been put forward as a working hypothesis, as this type of measure had been adopted in other countries such as Finland and Hungary in 2011 and France in 2012. In 2014, the Minister of Finance, Maria Luísa Albuquerque, suggested this possibility, which was immediately criticized by the beverage industry sector.

For example, the President of the Portuguese Business Confederation (CIP) criticized the possibility of this measure going ahead, although he admitted that "excessive consumption of certain products could be harmful to health," recalling that "there were counseling programs and other measures to prevent people from overindulging" and that this should be the way forward.

In another vein, the Order of Nutritionists considered at the time that it would only make sense to tax products harmful to health if the measure were accompanied by subsidies for healthy foods and food education campaigns, justifying its position with the lack of scientific evidence that "isolated measures such as increasing the price of foods considered harmful to health, through taxes, lead to a reduction in their demand."

In that same year, the then Minister of Finance, Pires de Lima, considered the matter closed, opposing any further government action on this intention. In 2015 , and just a few months before the elections, the Ministry of Health, through the Deputy Secretary of State for Health, Leal da Costa, demonstrated its intention to apply special taxes to food products with excess salt and sugar, namely to beverages and packaged solid foods with salt and sugar levels exceeding certain limits.

At the time, one supporter of this measure was the president of the Order of Physicians, José Manuel Silva, who stated:

"The principle is correct. I am against prohibitionist measures, but making those who consume more of these types of products contribute to healthcare expenses is fair.".

However, the government fell, and on November 26, 2015, a government was formed from the political party that came second in the elections – PS –, supported by a parliamentary majority made up of BE, PCP and PEV, and it is during this 13th Legislature that tax measures on sugary drinks will be approved.

The importance of technical robustness in supporting political decision-making

In 2016, the PNPAS (National Program for the Promotion of Healthy Eating) published the book " Reducing Sugar Consumption in Portugal: Evidence Justifying Action, " compiling extensive evidence justifying the adoption of public health measures to act politically (i.e., through national public health measures supported by the Government or central government bodies).

In this document, the nutritionists, who were the authors, presented 53 arguments, based on scientific evidence, that could justify a decision to implement a strategy to reduce sugar consumption in Portugal.

Among these arguments was the possibility of taxation and the relatively robust scientific evidence on the relationship between excessive consumption of free sugars and human health, namely the literature reviews that systematize the results found by the various studies that evaluated the relationship between the consumption of sugary drinks and overweight/obesity and other chronic diseases.

The vast majority of observational studies included in these review articles suggested that consumption of sugary drinks was positively associated with adiposity and obesity, tooth decay, and possibly with the risk of diabetes.

This is despite the efforts of food education campaigns in the 1990s and the creation and widespread dissemination of various high-quality food education tools, such as the Food Wheel, and other related activities carried out by Portuguese nutritionists.

At the time, and even before the National Food and Physical Activity Survey (IAN-AF), the data we had from the Food Balance Sheets of the National Institute of Statistics indicated that in Portugal, the availability of soft drinks in 2012 was 203.6 mL per inhabitant/day, and between 1990 and 2012, the availability of soft drinks had doubled, going from 101.9 mL per inhabitant/day in 1990 to 203.6 mL per inhabitant/day in 2012.

During the period analyzed and in Portugal, "soft drinks on sale had very disparate values ​​of added sugars. According to the study and "own, non-exhaustive research, in the case of cola-flavored soft drinks, beverages with sugar values ​​ranging from zero grams to 11.1 g/100mL are found on the market . In the case of tea-flavored soft drinks, the values ​​can reach 8.1 g/100mL, and in other soft drinks, products with sugar values ​​up to 12.2 g/100mL are found on sale .

Half of the international recommendation of consuming up to a maximum of 200 kcal per day from free sugars can be exceeded by consuming just one 330 mL serving of some of these soft drinks on the market.

In the same study, we presented data on consumption at the time, offering a complex picture of the situation: “Data available in Portugal, from a study (Generation 21) that has followed 8647 children from northern Portugal since birth (probably the largest national cohort of its kind), identified that approximately 35% of 2-year-old children consumed soft drinks at least once a week, a behavior that remained consistent in 88% of these children at age 4. At this age, more than half of the children followed (52%) consume soft drinks and nectars daily, and 20% of these children consume tea-based soft drinks daily, this being the most consumed type of soft drink.”

In various interactions with representatives of the sector, it was common to hear the argument that it made no sense to tax or apply fiscal measures to certain foods, namely sugary drinks, since the excessive consumption of free sugars in the population would certainly come from other food sources besides just drinks (data from the INE [National Institute of Statistics] and the Food Balance Sheets did not allow us to contradict this opinion) and that self-regulation practices were already in place, in addition to the fact that the most important thing was to increase the nutritional education of the population (at the time the word – literacy – was not yet fashionable) and allow empowered citizens to make informed choices.

It was in this context of some impasse that the PNPAS Manual was developed while the National Food and Physical Activity Survey (IAN-AF) was underway between 2015-2016, which confirmed the need for a more efficient intervention to combat excessive sugar consumption.

We are convinced of the importance of these technical documents, produced by experts, for making sound political decisions.

The importance of National Food Surveys for decision-making

The results of the IAN-AF (which are a powerful tool for guiding/confirming public policies) were released in 2017 and showed levels of free sugar consumption far exceeding WHO recommendations. Direct assessment through observation of regular consumption by representative population groups, not only by age and gender, but also by region and socioeconomic status, was essential for decision-making.

The results of the IAN-AF demonstrated that 24.3% of the national population had a consumption of free sugars exceeding 10% of the total energy value (the maximum value recommended by the WHO), with this prevalence being higher in male adolescents (51.1%) and female adolescents (49.1%).

Daily consumption of soft drinks or nectars (220 g/day or more) was reported by 18% of respondents, with this prevalence being higher among adolescents (42%). Considering only those who reported some consumption of these drinks, 25% drank approximately the equivalent of two soft drinks per day.

These results confirmed a high consumption of free sugars from sugary drinks, particularly among children and young people, but more importantly, they confirmed that this food group is the main supplier of free sugars compared to other groups. Furthermore, besides water, sugar, and additives, these drinks added little else to the nutritional profile of their consumers.

More than enough reasons for a more robust intervention in this area, and even a differentiated one compared to those that had been in place until then.

What measures can be taken to change the consumption of sugary drinks?

The changing food environment where people live and shop is considered a decisive factor in the adoption of healthy behaviors, along with increasing individuals' ability to make healthy choices.

This type of tax was initially proposed by Kelly Brownell , director of the Yale Center for Eating and Weight Disorders, in 1994, who suggested creating a tax on foods high in fat with the intention of making them more expensive, thus discouraging their consumption. These ideas were controversial in American society and unsuccessful in terms of implementation.

Starting in 2003, the WHO began to argue that the cost and price of food were essential in regulating obesity, and in 2007, taxation was suggested by other authors as a way to prevent and control diseases caused by excess sugar, salt, and fat. Since then, several documents have been produced on this subject.

In March 2015, the WHO published the report " Using price policies to promote healthier diets, " which analyzed several fiscal measures already implemented in different countries in the European context (Denmark, Finland, Hungary, and France), suggesting that the results of these case studies were consistent with theoretical models showing that these measures had the capacity to induce changes in consumer purchasing behavior.

According to the WHO, the use of taxation measures on sugary drinks, combined with other measures that also encourage the gradual reformulation of these products, as well as awareness and nutritional education measures for the population, should be strategies to consider.

The WHO also suggested that, similar to what was observed in the case of Mexico, applying a tax that represented a 10% increase in the price of sugary drinks could reduce their consumption by about 10-12%, potentially having a significant impact on reducing the prevalence of overweight and obesity.

These and other works were essential in outlining the Portuguese tax model, namely the preparatory studies for the measures to be implemented in the United Kingdom, which were only applied in 2018.

Although there is some consensus on the timeliness and effectiveness of these measures, several authors, as early as 2015 , suggested the need for these measures to be accompanied by robust monitoring and impact evaluation studies, capable of assessing the possible regressive effect of these measures and verifying whether the decrease in the purchase/consumption of taxed foods was not replaced and compensated by the purchase/consumption of other equally unhealthy foods, studies that were partly carried out in our country later.

Beyond this discussion, it was also necessary to take into account the opinion of representatives from the sugary drinks and food industries, who considered the self-regulation model more efficient than taxation, both in regulating advertising and in reducing the amount of sugar in the foods available.

However, despite the fact that "self-regulation models" have been in place for some years in our country, consumption has remained high and the availability of these beverages in the national market has increased. Several studies also pointed, at the time, to the limited effectiveness of self-regulation in various countries, notably Spain.

Other studies also pointed to the fact that these tax measures could accelerate the reformulation of food products by the food industry. In particular, the evaluation study of the food taxation measure in Hungary showed that around 40% of food industry companies operating in Hungary reformulated their products after or immediately before the tax measures came into effect in that country.

All these factors were important in preparing the design of the Portuguese tax model that came into effect on February 1, 2017.

IABA*

* Tax on alcoholic beverages and non-alcoholic beverages with added sugar

The drafting of the proposal for taxing sugary drinks in Portugal was based on WHO recommendations that advocated..

“The use of special consumption taxes, configured as specific taxes, that is, based on the quantity or on a specific ingredient or nutrient of a product, as opposed to sales or ad valorem taxes, since the specific consumption tax increases the price of all products to the same extent, regardless of their selling price, thus avoiding the substitution effect with lower-priced products that contain the harmful nutrient or ingredient and that would suffer a less significant price increase.”

“The choice of the special consumption tax model was based on the fact that this type of tax essentially has extra-fiscal purposes, namely the repression and alteration of consumption behaviors and the correction of external factors, rather than the obtaining of tax revenue. It is not based, therefore, on the contributory capacity of taxpayers, but rather on a principle of equivalence, which can be found in Article 2 of the current Special Consumption Tax Code, which determines that taxpayers should be burdened in proportion to the costs they cause in the areas of the environment and public health, in implementation of a general rule of tax equality.”

It should be noted that beverages containing added sugar or other sweeteners were subject to the tax, regardless of their caloric value. Thus, sugary drinks with lower nutritional value (soft drinks usually marketed under the designations "light" and "zero") were subject to taxation.

In the initial fiscal approach, the legislator opted for the introduction of two tax brackets, depending on the amount of sugar present

1. Sugar content less than 80 grams per liter: €8.22/hl;
2. Sugar content equal to or greater than 80 grams per liter: €16.69/hl (rate updated by Law/State Budget 2018).

All this technical work was carried out by the Ministry of Finance and the Ministry of Health in collaboration with the PNPAS and the DGS in time to be included in the 2017 state budget and to come into force on February 1, 2017.

In Nutrimento, it was written that day:

“With this legislative measure, it is expected that the consumption of these beverages will be discouraged, allowing for a reduction in sugar consumption in Portugal, which is almost double the maximum recommendations suggested by the World Health Organization (WHO). The revenue will be allocated to the National Health Service to ensure the promotion of healthy lifestyles. It is important to emphasize that measures such as these must be accompanied by awareness and education campaigns, as well as regulation of food advertising and nutritional information on labels, as mentioned by the WHO.”

The integration of other complementary measures was considered from the outset. As happened in other countries such as Estonia , Portugal adopted or would adopt complementary measures to reduce the consumption of sugary drinks and their negative health effects, namely the regulation of food advertising, raising awareness of the effects of excessive sugar consumption on health through national communication campaigns such as the one carried out in 2018, interventions in schools regulating the food supply, or measures to reformulate food products on sale.

However, the State Budget (OE) for the year 2018, approved by Law No. 114/2017, of December 29, brought about some changes regarding the objective incidence of the tax, provided for in Article 87-A of the CIEC, altering the incidence and the rates and, in 2019, the OE created a new change with the category of beverages with a sugar content of up to 80 grams per liter of beverage being divided into three categories.

Effects of the Tax

The IABA, initiated in 2017, had various impacts, but the most visible were at the level of:

1. Changes to the final price of these products for the consumer;
2. Change in sales volume;
3. Reformulation of the sugar content of these drinks.

Although there have been changes in price and sales volumes, the most significant changes, from a public health perspective, have occurred in the reformulation of the beverages' composition, with a rapid decrease in the free sugar content.

According to data from GlobalData and PROBEB, during the years 2013 to 2016 the percentage of beverages with a sugar content higher than 8 g remained relatively constant (ranging between 60.8% and 64.3%). However, in 2017, the year the tax was implemented, there was a significant reduction in the percentage of beverages with sugar content above 8 g, reaching 37.9%.

During the period of 2016 and 2017, as a result of both the reduction in sales volume of these beverages and the shift in consumption towards beverages with lower sugar content, and the reformulation processes carried out by the beverage industry with a view to reducing their sugar content, data from PROBEB (Portuguese Association of Non-Alcoholic Refreshing Beverages) suggest that there was a 15.2% reduction in the total volume of sugar consumed through these beverages, representing a total of 5630 tons of sugar.

Subsequently, between 2017 and 2023, data from the Tax Authority showed a 36% decrease in the proportion of beverages classified in the highest tax bracket (sugar content greater than or equal to 8 g/100 mL) for the period 2017-2023.

Additionally, the most recent data shows even more significant results regarding the increase in the percentage of beverages that fall into the lowest tax brackets. Between 2019 and 2023, there was a 54% increase in the proportion of beverages covered by the lowest tax bracket (sugar content less than 2.5 g/100 mL), and a 52% increase in the proportion of beverages covered by the sugar content bracket of 2.5 to 5 g/100 mL. Conversely, there was a 62% reduction in the proportion of beverages covered by the sugar content bracket of 5 to 8 g/100 mL.

Thus, it is possible to verify that the impact of the tax on reducing the sugar content of these beverages has been continuous over time, remaining so in the last years under analysis, including the year 2023.

Source: Tax Authority, 2024.

In parallel, if we analyze the results of the agreement for the reformulation of food products, which has since begun in Portugal in collaboration with vast sectors of the food industry, it is possible to observe what has been achieved in reducing sugar content, and this includes other categories of food products besides just soft drinks.

The data show a significant difference between the reduction in sugar content in soft drinks and the reduction in sugar content in other food categories – a 16.1% reduction in the case of soft drinks versus an average reduction of only 5.44% in the remaining food categories (nectars, breakfast cereals, fermented milk, chocolate milk and yogurts) – which suggests that, for food categories not covered by the tax, the results obtained in reducing sugar content are considerably smaller and slower.

Source: Nielsen IQ, 2022.

It should also be noted that the tax has been updated annually at the average inflation rate, as recommended by the World Health Organization, which helps to mitigate the expected smaller long-term effect of this tax on reducing sales volume.

However, it is emphasized that the relevance of the tax for promoting health is not so much due to the reduction in the consumption of these beverages, but rather to its incentive to reduce the average sugar content of these beverages in circulation.

This tax has promoted a continued reduction in the sugar content of these drinks.

The most recent data, for the year 2023, confirms that this trend continues, meaning the tax remains effective. Furthermore, self-regulation or co-regulation measures initiated by the food industry have never promoted such significant reductions in the sugar content of foods, nor at this speed.

Some conclusions

The process of implementing fiscal measures to reduce the availability of sugar in the country appears to be working and achieving its objectives since its implementation.

The implemented model was particularly effective in reformulating sugary drinks, reducing the amount of sugar available at an unprecedented speed and scope.

The measures adopted to update the fiscal policies seem to be working, maintaining pressure for innovation and the creation of new proposals with less sugar.

The development and implementation of these models can benefit from the support of international organizations and the technical participation of nutritionists, both in identifying problems and in outlining fiscal proposals.

The fact that the revenue from this tax reverts to the National Health Service (SNS) may help explain the positive acceptance of these measures by the population in studies already carried out on this subject.

Fiscal measures have helped improve the food environment where people choose and buy food, but for these measures to be more effective they need to be integrated into a comprehensive strategy and complemented by measures that empower citizens to make healthy choices.

The WHO and independent studies by international organizations have positioned Portugal as a benchmark country in the integration of these measures.

Given the scope and horizontal nature of the fiscal measures, it seems to us that these measures may be less socially discriminatory than measures aimed at empowering populations, which tend to have less impact and results on economically vulnerable populations with lower levels of education, but this effect needs to be confirmed.

Despite the efforts made by national authorities and the reduction in childhood obesity during some years of the last decade, we cannot directly link these effects to the measures implemented, since dietary-related diseases are multifactorial and very sensitive to variations in the economy, among other things.

Despite all this, it is possible to conclude that the fiscal measures have allowed and continue to allow a reduction in the consumption of sugar and empty calories from sugary drinks sold in Portugal.