An estimate of the effect of the Soft Drinks Industry Levy on employment

July 11, 2016 12:00 AM

As has repeatedly been found amongst countries that have attempted them, sugar taxes have been poor at improving public health. What is perhaps equally important is the damaging effect that the tax has had on employment.

Taxes nominally levied on businesses such as Corporation Tax, lead to lower employment and/or wages. This does necessarily mean that individuals are made redundant, however. The impact may well be that fewer jobs are created than would have been in the absence of the tax.

This paper looks at the effect that the sugar tax had in Mexico on employment. It then estimates what the equivalent effect would be in the UK, adjusting for the facts that the tax rate in the UK is higher and that the soft drinks industry makes a proportionally smaller contribution to the UK economy. From this, an estimate of the impact on employment-related tax revenues is also made.

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