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Working paper

Implications of a Sugar Tax in New Zealand: Incidence and Effectiveness (WP 16/09)

Issue date: 
Friday, 3 February 2017
View point: 
Publication category: 
JEL classification: 
H2 - Taxation, Subsidies, and Revenue - General
H3 - Fiscal Policies and Behavior of Economic Agents

Formats and related files

This paper explores the underlying logic for, and some of the challenges associated with, sugar taxes as a policy instrument for reducing obesity.


This paper has two aims. First, it surveys some of the literature on the likely effectiveness of sugar taxes as a policy instrument for reducing morbidity and mortality associated with obesity. There is a wide range of estimates among the literature of the price elasticity of demand for sugary products. A plurality of studies found that groups most at risk from obesity have greater price sensitivity. Studies also found there is a risk of consumers substituting unhealthy but non-taxed products for taxed products, negating any potential health improvements from a tax. The paper’s second aim is to build on the literature review by analysing the possible incidence of a sugar tax in New Zealand, based on New Zealand household expenditure data. The empirical analysis presented is consistent with international evidence that a sugar tax would be regressive at the general population level.


I am grateful to John Creedy for his advice throughout the drafting of this paper, Kristie Carter and John Marney for discussions in the preliminary stages, Matt Cowan and Suzy Morrissey for constructive suggestions. Christopher Ball provided valuable help with the data. Thanks must also go to the Policy and Strategy Team at Inland Revenue for inviting me to present these findings to them and providing helpful feedback. Access to data used in this paper was provided by Statistics New Zealand under conditions designed to give effect to the security and confidentiality provisions of the Statistics Act 1975. The graphs presented in this report are the work of the author and not Statistics New Zealand. The views, opinions, findings and conclusions are strictly those of the author and do not necessarily reflect the views of the New Zealand Treasury.


The views, opinions, findings, and conclusions or recommendations expressed in this Working Paper are strictly those of the author(s). They do not necessarily reflect the views of the New Zealand Treasury or the New Zealand Government. The New Zealand Treasury and the New Zealand Government take no responsibility for any errors or omissions in, or for the correctness of, the information contained in these working papers. The paper is presented not as policy, but with a view to inform and stimulate wider debate.

Last updated: 
Wednesday, 8 February 2017