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Approved by the Cabinet of Ministers Budget Declaration</ strong> for the years 2025-2027 updated the discussions of that year’s past regarding the introduction of an excise tax on sugar-sweetened beverages. It is worth recalling that in March 2023, the Verkhovna Rada registered two draft laws on the excise tax on sweetened beverages: No. 9032-1 and №9033-1< /strong>. The first in the Tax Code proposes the introduction of a tax rate on mineral and carbonated waters with the addition of sugar and other sweeteners, aromatic substances in the amount of 0.1 euro (4 UAH) per one liter of drink. The second draft law specifies that the funds received from the payment of this tax are planned to be directed to the implementation of programs for the prevention and treatment of non-communicable diseases, as well as to the support of the children’s nutrition program in schools, initiated by the first lady Olena Zelenska.
International experience
The practice of two-level tax implementation is widespread in European and other countries – the tax rate depends on the sugar content of drinks – a lower amount for drinks with up to 8 grams and an increased amount for drinks with more than 8 grams per 100 ml. In particular, in 2018, such a case appeared in Great Britain. The British experience in this direction shows that the initiative had an intermediate goal – to change the behavior of manufacturers, namely to give them the opportunity to reduce the level of sugar in drinks. The initiative had a good effect – more than 50% of manufacturers reduced the level of sugar in drinks.
Among all the countries that have a two-level system of taxation of sweetened beverages, there is an example of Portugal, which was recognized as successful and positive by the WHO European Office. In Portugal, there is also a two-level system: less than 8 grams – 0.08 euros (2.67 UAH), more than 8 grams of sugar – the tax is 0.16 euros (5.35 UAH). And the income from the tax goes to the development of the national health care system, which declares its main goal to reduce the harmful effects of sugary drinks and reduce the level of obesity.
In Poland, the tax structure provides an additional fee for drinks with added sugars (monosaccharides, disaccharides, or food products containing such substances), as well as sweeteners (for example, xylitol, sorbitol or aspartame), and for drinks with the addition of taurine and caffeine.
In France, an excise duty on sugary drinks was introduced back in 2012, it was extended to all soft drinks with added sugar or sweeteners. Due to the use of a fixed price regardless of the amount of sugar (0.0716 euros (2.30 UAH) per liter) for 5-6 years, the tax was ineffective. However, in 2018, the French government supported the initiative to introduce a tax level that depends on the amount of sugar. However, as of 2019, tax optimization forced many manufacturers to significantly reduce the sugar content in drinks: from 6.6 g per 100 ml to 2 g.
Does the increase in excise tax affect the decrease in consumption?
Berkeley’s 1% per ounce excise reduced consumption of sweetened beverages among low-income residents and ethnic minorities by 21%. The 2019 Philadelphia Soda Tax Experiment also supported the hypothesis that the introduction of the tax reduces consumption of sugar-sweetened sodas. In particular, research in 2019 found that sales of sweetened beverages declined more in Philadelphia than in Berkeley, with researchers finding a 51% drop in sugary beverage sales a year after the tax was implemented.
In Mexico, after 1 year after the introduction of excise duty, the price of sugar-sweetened beverages increased by 10%. And this had the effect that purchases of sugar-sweetened beverages fell by an average of 6%, but purchases of bottled water increased by 16.2% from the baseline.
On the other hand, it should be noted that according to research introduction of large taxes ( 20% and 40%) does not have a positive effect in the fight against excess weight, as people switch to similar cheaper, but no less caloric products.
Opponents of the idea
In 2016, the analytical center of the Institute of Economic Affairs (IEA) published conclusions that consumers react to the tax increase by buying goods that are lower in price and quality, and also switch to consuming other high-calorie beverages, such as fruit juices, alcohol, etc. And they also argue that the evidence for taxing soft drinks (or any other source of calories) as a means of reducing obesity is weak and largely anecdotal. Referring specifically to the successful implementation of an excise tax in Mexico, IEA analysts claim that a 10% tax on sugary drinks was associated with a 6% drop in sales and an average daily reduction in consumption of just 36ml per person.
Representatives of the Ukrainian industry for the production of sweet drinks, interviewed by Forbes in 2023, oppose the initiative. In particular, they assure that this, on the contrary, can reduce the amount of tax revenues to the state budget. Arguing that the increase in the cost of drinks will reduce their quality, and also that the increase in the cost of sweet carbonated drinks will lead to the emergence of an illegal market for such drinks. In addition, representatives of the industry predict a decrease in demand for sugar and increased competition from imported sweeteners and other sugar alternatives in the event of the introduction of an excise tax.
Conclusions
Although the opinions of various analysts, who broadcast to us that there are ambiguous things about the possibility of introducing excise taxes on drinks with sweeteners. Most studies support the fact that taxation of sugar-sweetened beverages leads to a reduction in consumption. But the effectiveness of taxes depends precisely on their design, accompanying educational campaigns and the general context of the socio-economic environment.
Therefore, in the context of Ukraine, it is appropriate to consider the experience of neighboring Poland, as well as other countries with introduced two-level taxation, where the rate is correlated according to the content of the sugar level, in order to, on the one hand, collect appropriate tax revenues and try to change the behavior of producers by providing the opportunity to reduce the amount of sugar in drinks . At the same time, it should be taken into account that examples of the introduction of high tax rates did not bring a positive effect from such a decision.
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