Should We Tax Sugar and If So How?

Abstract

This article reviews empirical studies of proposals to tax sugary products in Australia. A corrective tax must be designed carefully if it is to increase national welfare. There is an underlying problem in designing such a tax because consumers are heterogeneous. The best choice of goods to be taxed is the group of sugar-sweetened-beverages, the best tax base is the sugar content and the best tax form is a progressive specific tax with two or more levels. We recommend initial rates that are equal to those of the UK tax on SSBs.