Soft Drinks Industry Levy (SDIL)
The Soft Drinks Industry Levy (SDIL) – better known as the ‘sugar tax’ – came into force in the UK in April 2018 and is designed to encourage manufacturers to reformulate their drinks to reduce the sugar content. The aim of the tax is to discourage consumption of sugar-rich drinks, so as to reduce the negative health effects of over-consumption of sugars – especially the effects of sugar consumption on obesity and diabetes.
Sugar taxes are now commonplace, and, by 2019, over 35 countries and states had introduced some form of sugar tax, with many more expected to introduce them in the next few years.
The soft drinks industry, which contributes some £6.4bn to UK GDP, and a further £2.9bn when the supply chain is included, started to make changes when the tax was first announced in 2016.
Since it was announced, most manufacturers of soft drinks have reduced the sugar content of their drinks to avoid having to charge the tax. Reductions in sugar content have generally been achieved by substituting sugar with artificial sweeteners.
According to the UK government, all revenues raised through the levy will fund new sports facilities in schools, and schemes like the ‘healthy breakfast clubs’ initiative.
Sugar tax rates
The rates are applied to drinks which hit one of two thresholds for sugar content:
- 24p per liter of drink if it contains 8 grams of sugar per 100 millilitres, or
- 18p per litre of drink if it contains between 5 – 8 grams of sugar per 100 millilitres.
Drinks are exempt if they:
- Contain at least 75% milk
- Are milk substitutes (such as soya milk) containing at least 120mg of calcium per 100ml
- Are alcohol substitutes
- Are infant formula drinks or drinks for special medical purposes
Soft drinks elasticities
Price elasticities of demand for soft drinks are estimated to be inelastic – less than (-) 1.0 , meaning that price increases may have only a modest impact on consumption.
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Source: Adam DM Briggs, et al “Overall and income specific effect on prevalence of overweight and obesity of 20% sugar sweetened drink tax in the UK: econometric and comparative risk assessment modelling study”, British Medical Jou