Russia mulls a tax on "unhealthy" food

Russia’s Finance Ministry has been commissioned by Prime Minister Dmitri Medvedev to explore the possibility of introducing taxes on sugary drinks, palm oil and other unhealthy foods. The Finance Ministry has welcomed the initiative.

Russia is not the first to consider such measure. Some countries are in the process of developing such taxes while others – Hungary, Denmark, Finland and Norway – already introduced them.

That is not to say, however, that such measures are always doomed to success. For example, Denmark introduced a tax on sugar-sweetened beverages in the 1930x, which in 2013 was recognized a failure and abolished. A tax on foods with a total fat over 2.5% was introduced in 2011, but in 2013 the experiment proved a failure too.

A vivid discussion on the introduction of  a so-called sugar tax was sparked last autumn in the UK. Many voted in support of the tax on the British Parliament official website1.

In 2013 the Mexican President launched an initiative to tax soda drinks and other high-sugar drinks, as well as concentrates that are used for the production of such drinks. The Mexican government anticipated that such measure would help generate about $900m of tax revenues annually.

In 2012 a similar initiative came fr om the New York City Mayor, who proposed a 20% tax on sugary drinks and a 475m lim it on retail sales of such drinks, but the Supreme Court of the State of New York ruled as illegal this initiative2.  

This is not to say that these countries are looking for new sources of budget revenues. The ultimate objective is to build a healthier nation. For instance, both ordinary British people and healthcare specialists express their concerns over obesity issues and diabetes in the UK3. A report from the British Medical Association (BMA) demands a package of measures to address the “obesity epidemic”, including a 20% tax on sugar sweetened drinks and unhealthy snacks. “While sugar-sweetened drinks are very high in calories they are of limited nutritional value and when people in the UK are already consuming far too much sugar, we are increasingly concerned about how they contribute towards conditions like diabetes”4, doctors say.

The UK Public Health Association recommends no more than 5% of our calorie intake should come from “free sugars”5. Diet specialists say sugar is one of the most unhealthiest foods, similar to a drug. More than 99% of sugar is simple carbohydrate that turns rapidly into glucose and is absorbed without having to be digested. The absorption is so immediate that it requires an excessive amount of insulin into the blood, which ironically leads to low blood sugar level or hypoglycemia6.

The lower-sugar campaign was supported by TV chef Jamie Oliver and British multinational grocery and general merchandise retailer TESCO. In particular, TESCO says its own-brand drinks will contain 5% less sugar each year7.

The opponents of such tax (e.g. Chief Executive Officer, McDonald’s UK) argue that it will not lower sugar consumption in the UK, because the price of sugary drinks is low while high-sugar products are addictive and hard to quit8. Even British Prime Minister David Cameron is against such tax, and he says there should be more efficient solutions to prevent sugar addiction9.

There is another threat coming from a sugar tax: alternative compounds may be used as sugar substitutes, which may hit even worse the health of the nation10. Doctors view a potential tax as a source of budget revenues which could be appropriated to increase the share of fruits and vegetables of the diet of British school children. Today sugar overconsumption in the UK costs the Treasury more than ?5bn a year11.

Natalya Kornienko, Head of the Tax System Development Department
Natalya Pushkareva, а research scholar of the Tax System Development Department