Image from Shutterstock
In recent months, Portugal, South Africa and the UK announced plans to introduce a tax on sugar sweetened beverages (‘SSB tax’), joining a growing number of countries including France, Mexico, Hungary, Mauritius, Nauru, Cook Islands and Fiji that are seeking to combat overweight and obesity by implementing fiscal policies aimed at addressing patterns of unhealthy food consumption and, specifically, the intake of energy-dense foods and beverages.
It is clear that the need to address overweight and obesity is critical. Worldwide, at least 2.8 million people die each year as a result of being overweight or obese. Overweight and obesity is associated with a number of non-communicable diseases including type 2 diabetes, cardiovascular disease and 11 types of cancers.
Support for the use of effectively designed and implemented tax measures to promote healthy diet and reduce the consumption of energy-dense foods can be found in a number of key international instruments including the 2011 UN political declaration on NCDs, WHO comprehensive implementation plan on maternal, infant and young child nutrition, the WHO Global Action Plan for the prevention and control of Non-Communicable Diseases 2013-2020, and more recently the final report of the Commission on Ending Childhood Obesity.
Yet countries seeking to implement SSB taxes have been met with resistance from the food and beverage industry, with claims that public health-related taxes are unconstitutional and violate national laws including rights of commercial enterprise and rights of consumers. Claims have also been made that an SSB tax infringes regional and international trade and investment agreements by jeopardising the free movement of goods, discriminating in favour of domestic products, and significantly reducing returns on investments.
The arguments raised by the food and beverage industry are not novel. They echo claims made by the tobacco industry in response to tobacco control measures. Countries such as Sri Lanka, the UK, Kenya, Norway and Peru have successfully responded to legal challenges against a range of tobacco control measures, including smokefree areas, advertising, promotion and sponsorship bans, and packaging and labelling measures based on claims of violation of commercial rights and rights of consumers.
Unsuccessful challenges have also been brought by the tobacco industry under investment law agreements against Australia’s and Uruguay’s tobacco packaging measures on a number of grounds, including that the tobacco control measures in question ‘expropriated’ or resulted in the effective loss of the investor's enjoyment of, or control over, its property and constituted unfair and inequitable treatment. A dispute is currently pending before the World Trade Organisation against Australia’s plain packaging laws. Among the claims is that the measure is more trade-restrictive than necessary and infringes intellectual property obligations under WTO agreements.
As tobacco control jurisprudence grows (for more information, see the McCabe Centre’s WHO FCTC knowledge hub website), we are able to extrapolate a number of clear lessons that will be critical for countries to keep in mind when designing and implementing SSB taxes.
The four key learnings are as follows:
- Regulatory distinctions in tax coverage should be based on bona-fide evidence-based reasoning.
Countries seeking to implement SSB taxes will ultimately be required to make regulatory distinctions. These distinctions include the decision to implement a sugar-based tax rather than a tax on other unhealthy nutrients such as fats and salts, and to impose a tax on beverages as opposed to other sugary products. Countries will also need to determine which beverages will be included and excluded from the coverage of the tax and what threshold level of sugar will invoke application of the tax. These countries could face claims that the SSB tax is discriminatory under international trade and investment law.
Tobacco control measures have been challenged on the grounds they discriminate against imported products, investors and investments under international trade and investment law. A clear message to emerge from these cases is that countries drawing distinctions between products should ensure that any such distinctions do not discriminate, either on the face of the measure or in effect, against or between imported products or investors, or if they do, the distinctions are due to bona-fide, evidence-based public health reasons.
- The importance of designing evidence-based measures tailored to a country’s public health objectives as part of a comprehensive strategy.
The protection of public health has been recognised as an important regulatory objective by domestic, regional and international decision-making bodies. However, this does not provide countries seeking to implement a public health measure such as an SSB tax with unlimited regulatory autonomy in terms of the design and implementation of the measure.
Tobacco control jurisprudence clearly establishes the need for measures to be based on evidence and specifically tailored to states’ public health objectives. As an example, Australia’s plain packaging measure, including the objects of the Act, is tailored to extensive research evidence obtained prior to implementation of the measure. In addition, implementing SSB taxes as part of a comprehensive strategy to combat overweight and obesity will ensure that countries are not only adopting best practice public health principles but also provide support to claims from industry advocates that there are less trade-restrictive alternatives that could make an equal or greater contribution to the public health objective.
- Observation of procedural requirements and due process.
It is critical that countries carefully consider the process adopted in the design and implementation of an SSB tax. Tobacco control measures have been challenged under both domestic and international investment law jurisdictions on procedural grounds including claims that due process has not been observed, required regulatory processes not followed, and/ or insufficient opportunity provided for consultation with industry.
It is clear from tobacco control cases that governments should observe due process to the extent required in terms of interacting with industry while being wary of the need to protect public health policies from the vested interests of industry. Some clear lessons to emerge from case law are for governments to establish clear expectations with industry that NCD risk factors will be subject to ongoing regulation; to avoid making specific commitments/assurances to industry that the government will not enact obesity and overweight control measures; to ensure the government has the relevant legal and regulatory authority to implement the measure; and allowing flexibility in the legal structure of the measure in case changes are required.
- Recognition of the sovereign right of states to regulate in the interests of public health
Countries that have designed and implemented evidence-based bona-fide SSB tax measures may still face legal challenges to the measure. These countries can take comfort in a long-line of tobacco control-related judicial decisions in domestic, regional and international jurisdictions that have upheld bona-fide, evidence-based and non-discriminatory measures. Courts have recognised that rights claimed by industry are not absolute rights and that limitations on these rights are justified on the basis of other rights, interests and obligations including the right to health enshrined in many national constitutions and other laws and international treaties including the International Covenant on Economic, Social and Cultural Rights.
SSB taxes that are designed and implemented with these lessons in mind, and engage multisectoral involvement in the development of the tax, will provide a critical tool for countries seeking to address rising levels of overweight and obesity and to achieve key targets outlined in global instruments including the Sustainable Development Goals and WHO Global Action Plan.