Expert analysis: 'Graded sugar tax model' could be the way to go for Malaysia to stop over-consumption

Following up on our previous report debating whether to tax sugar or soda to stop sugar over-consumption in Malaysia​, FoodNavigator-Asia​ spoke to Penang Institute Senior Analyst Dr Lim Chee Han to see if any other options were possible.

“What the government still can do is to expand and transform the ‘soda tax’ to ‘sugar tax’ imposed on manufactured and imported F&B products which exceeded certain thresholds of sugar level,”​ said Dr Lim.

“The graded multi-tier excise tax model could be either volumetric-based (eg per 100ml of beverage) or content based (eg per gram of sugar content of beverage), as practised by UK and Thailand.”​

That said, Dr Lim opined that it would be better to send a clear message to the public about the public health cost of consuming sweetened food and beverages by reflecting that cost in the items’ prices.

“However, we realise that it might be rather difficult to implement, enforce and monitor [because food retail outlets] sell food and beverages directly to the consumers, [and their retail products] are difficult to impose tax on,”​ he said.

“[As such], the only way of [imposing tax] is to raise raw sugar price across board, but that would likely to cause serious inflation and public uproar.”​

“This is also unlikely to be practical as raw sugar is generally cheap and the government could not hike the price too exorbitantly high. Sometimes it just takes one more spoon of sugar to exceed the recommended level of sweetness, and how much price difference can one pay in this one scoop?”​

Sugar prices are controlled in Malaysia, and raising this price across the board would not only be unpopular for the newly-installed Pakatan Harapan government, it would also “provide an excuse for the F&B sector to hike prices for a wide variety of related-items.”​

Sugary drinks alone is not the answer

In 2015, the World Health Organisation (WHO) released a set of sugar intake guidelines. This recommends that adults and children reduce their daily intake of free sugars to 25 grams per day.

“[Research shows that the Malaysian population has a] rather high consumption on many sweetened food and drinks on a daily basis. [For example], ​malted milk, like the popular Nestle Milo® probably contributes more sugar than carbonated drinks,” added Dr Lim.

“[As such], targeting just soda drinks probably will not be sufficient.”​

Another of the main culprits he highlighted was kuih​, or traditional cakes, which are enjoyed daily by about 80% of the population.

“Clearly, if the government wants to reduce sugar intake among public, tackling just beverages is also futile without going to the main sweeteners and sweet food source.” ​

Raw sugar and condensed milk are the main raw ingredients used to sweeten drinks served in restaurants and other food service centres.

“It may not be wise and practical to use taxation to solve all the food-related public health issues, but the government must be selective in choosing one approach which could work to reduce the severity of the problem in greater specificity.”​

“In our opinion, excise tax on sweetened food and beverages could probably work.”​

Making a real impact on chronic diseases

Chronic health issues affecting Malaysians are typically termed by the health authority as ‘non-communicable diseases (NCDs)’.

“If excluding childbirth as the cause of hospitalisation, NCD cases took 45.2% of all in-patient cases [in Malaysia]. NCDs are also responsible for 73% of deaths among Malaysians,”​ said Dr Lim.

“[The] ‘soda tax’ was one of the 13 new health policies proposed by the Ministry of Health last December to tackle NCDs in Malaysia.” ​

“Only 4 out of 13 new policies are directly associated with food and beverages, this indicates that targeting only on sweetened beverages would not be sufficient to address the public health concerns especially on rising trend of obesity and diabetes.”​

“That does not suggest that the ‘soda tax’ policy would be definitely not [be] effective. The main question is, who (as in which demographic groups) would be the most likely targets who will change their dietary behaviour due to the new tax policy?” ​

“Logically, the ‘soda tax’ would be imposed upon the manufacturers and the producers of sugar-sweetened beverages, although the tax would most likely be passed on to the consumers.” ​

“Thus, the issue is, after the addition of tax, is the price of certain products still affordable or deterrent enough to most consumers for them to change their habit?”​

Given that the production cost for soda in Malaysia is lower than that of alcoholic beverages, he expressed concerns that a soda tax “may not do enough to deter/disincentivise people from purchasing and consuming high-sugar content beverages.”​

“In the end they would pay more and are still getting diabetic or/and obese,” ​he added.

Further to this, Dr Lim hypothesised that the soda tax might be most effective for individuals from lower household income class, and also on youth and kids who do not yet have income nor excessive pocket money.

“[It] might work [on the bottom 40% of household income class]​, and to curb the addiction at such young age, [but does not extend to the rest of the population],” ​he said.

How would it be best to implement any such sugar-related campaign?

The implementation of taxes related to sugar at various levels has seen varying degrees of success in different countries.

“Some countries impose soda tax as high as 42% like in Norway, 50% in United Arab Emirates and 10% in Mexico due to the cost of soft drink is much cheaper than drinking water,”​ said Dr Lim.

“That said, some countries have seen better health impacts than others, e.g. a decrease in taxed beverage purchases, reduced energy intake and weight loss.”​

“[However, we wish to emphasise that] the intention of the excise tax is not for people to give up certain drinks completely, but to instil a mentality where too sweet a beverage is not only more expensive but also not healthy.”​

“Once the public start to become aware and adjust their taste bud sensitivity accordingly to the right level of sweetness, half the battle is won.”​

Given this insight, he proposes that a successful health promotion campaign launched by the government needs comprehensive strategies that align with any excise tax implementation, citing Singapore as an example.

“MOH Malaysia could emulate […] Singapore for having 'Healthier Choice' symbol branding to differentiate certain products,” he suggested.​

“[This would] reinforce in the consumer's subconscious mindset that less-sugar less-fat diet is a healthy good choice, and that choice makes financial sense too.”​

“Only when the consumer preferences have shifted en-mass, [will] the F&B industry react and [adjust] the amount of sugar and fat in their food and beverages preparation or production.”​

All in all, Dr Lim believes that taxation alone as a financial incentive and penalty tool cannot achieve the desired health outcomes within the country.

“There must be [accompaniment] by other appropriate policies, and that might explain why certain countries enjoy greater success with the sweetened beverage tax,” added Dr Lim.​

“There are reasons why the sales of cigarettes and alcoholic beverages are increasing in certain market and being consumed by more people, despite high ‘sin taxes’ are imposed,”​ he said.