The Effectiveness and Rightfulness of Tax on Sugary ... - http

Master Thesis International Business Law

Author: Panuwud Wongcheen

SNR: U736075

Master: International Business Law (LLM)

Year: 2018-2019

Supervisor: Paul Obmina

The Effectiveness and Rightfulness of Tax on Sugary

Beverages in Thailand

2

Abstract

In 2017, Thailand started to imposed tax on sugary beverages from the concerns of the rise of obesity

among adults, children, and monks. While other jurisdictions usually set the tax by volume-based,

Thailand sets the tax based on sugar content in each beverage ranging approximately from 1-10percent

of the price of the product. The tax is only imposed on the natural sugar-sweetened products; thus,

artificial sweeteners can be used without any tax imposing on. Dairy products such as fresh milk, flavored

milk, and yogurt drinks are exempted. The sweeter the product is, the more tax it has to pay. However,

the weaknesses in achieving the obesity reduction goal still exist. It is true that when the consumer would

avoid sweeter beverages and swap to the less sweet product. However, when the consumer drinks two

bottles of less sweet products, the sugar which he receives could be more than one bottle sweet product.

The consumer should consume less sugary beverages due to the higher price regarding the rational choice

theory and other economic theories. However, there has been no evidence reporting the successfulness

in any jurisdictions in the long term. This thesis will analyze what are the commonalities between each

jurisdiction, the mutual overlook aspects and suggest the improvements that it should take into

consideration. The rightfulness of tax is likely to be not. When the government enacts regulations, which

impact rights and liberties of the people with the police power, it needs to comply with provisions under

the constitution. However, sugar tax was made by the taxation power, which was delegated to the excise

department and did not need to follow the provisions of police power under the constitution. It has

complied with all provisions and is considered legal under Thai law. However, according to the tax

principle, this tax seems to discriminating categories of products arbitrarily while neglecting the fact that

other products besides sugary beverages can also cause obesity and require tax imposition. It is also made

in the ineffective level and show fewer effects on some parties who have close relationships with the

political party. Lastly, it respects freedom of choice and is set at a low rate for not causing the loss of

purchase power and oppressing the poor. The rate is too low for efficient performance; thus, might not

show make it reach the expected public interest goal. When it cannot satisfy all of the tax principle pillars

while meets all legal provisions, it might be considered legal but not rightful under the tax principle.

Keywords: Obesity, Tax, Pigouvian tax, effectiveness, Sugary beverages, Externalities

3

Table of Contents Abstract ................................................................................................................................................................ 2

Chapter 1: Introduction........................................................................................................................................ 5

1.1 Background and problems .................................................................................................................. 5

1.2 Research Question ............................................................................................................................... 7

1.3 Objective of the Study ......................................................................................................................... 8

1.4 Methodology .............................................................................................................................................. 8

1.5 Major findings ............................................................................................................................................ 8

Chapter 2: OBESITY AND ITS PROBLEMS ........................................................................................................... 10

2.1. Obesity .................................................................................................................................................... 10

2.2.1 Obesity definition and health impacts ............................................................................................. 10

2.2.2 Causes of obesity .............................................................................................................................. 13

2.2.3 Current situation of obesity in Thailand and worldwide................................................................. 18

2.2. Obesity and economic impacts............................................................................................................... 19

CHAPTER 3: TAX FOR BEHAVIORS CONTROL IN THEORIES ............................................................................... 21

3.1 Freedom of choice and Rationale of choice theory ................................................................................ 21

3.2 Market failure and intervention for public interest ............................................................................... 23

3.3 Pigouvian tax, solution of market failure ................................................................................................ 25

3.4 Optimally effective regulation and policy in theory ............................................................................... 29

3.5 Excise tax Approach ................................................................................................................................. 31

3.6 Price Elasticity of Demand (PED) ............................................................................................................. 32

3.6 Previous failure of Interventions ............................................................................................................. 36

3.6.1 Alcohol .............................................................................................................................................. 36

3.6.2 Tobacco ............................................................................................................................................. 37

CHAPTER 4: ANALYSIS OF THE REGULATION AND THEIR EFFECTIVENESS ....................................................... 39

4.1 REGULATORY FRAMEWORKS WORLDWIDE ............................................................................................ 39

4.2.1 Mexico ............................................................................................................................................... 43

4.2.2 Norway .............................................................................................................................................. 46

4.2.3 Hungary ............................................................................................................................................. 49

4.3 Thailand in comparison with other jurisdictions .................................................................................... 52

4.4 SUMMARY ................................................................................................................................................ 59

CHAPTER 5: Challenges in the Implementation of the Sugar tax ..................................................................... 65

5.1 Inaccurate and unfair focusing .......................................................................................................... 65

5.2 Practicality ......................................................................................................................................... 67

4

5.3 Cost for substitutes ........................................................................................................................... 69

5.4 Regressivity ........................................................................................................................................ 71

5.5 Political lobbying ............................................................................................................................... 72

5.6 Uncontrolled pass-through tax and cartels ...................................................................................... 74

Chapter 6 Rightfulness of the sugar tax ............................................................................................................ 75

6.1 Police power and Taxation ...................................................................................................................... 75

6.1.1 Police power ..................................................................................................................................... 75

6.1.2 Exercises of police power ................................................................................................................. 81

6.2 Taxation and its limitation ....................................................................................................................... 88

6.2.1 Taxation power and its limitation .................................................................................................... 88

6.2.2 Legality of Sugar Tax ......................................................................................................................... 89

6.3 Paternalism and taxation......................................................................................................................... 91

Conclusion .......................................................................................................................................................... 95

Bibliography ....................................................................................................................................................... 99

Annex ................................................................................................................................................................ 113

Annex 1 ......................................................................................................................................................... 113

Annex 2 ......................................................................................................................................................... 113

5

Chapter 1: Introduction

1.1 Background and problems

The advancement of technology in communication has transformed the world from the small region into

a large scale of globalization. Knowledge, technologies, and culture are freely delivered among countries

in the world. Medias influent society in many aspects, such as fashion, food, sports, and beliefs or trends.

New cuisines are introduced into many countries and replace popularity of the traditional cuisine. A new

generation from many countries has changed their diet behaviors from what the previous generations

used to do from the more various types of more accessible cuisine. Food is one of the parts that has

dramatically changed globally in the last 30 years. Burgers, sushi, pizza can be found in almost every corner

in urban areas globally. In Thailand, traditional meals were very simple, which can be boiled vegetables,

soups, fish, chili paste, and rice. Obesity barely existed back in the old time there. Nowadays, traditional

foods have been replaced with high calories fast food as well as sugary beverages and desserts. Analyzing

nutrition in those fast foods would show the fact that they contain very high calories without filling

stomach. When they are combined with the food from the main meals would put the caloric intake exceed

the recommended level. Weight gaining can be the first noticeable impact of those foods. When those

foods are regularly consumed and exceed the expenditure calories, weight gaining will exceed the healthy

range. Tooth decay and obesity would be noticeable and perhaps also many chronic diseases such as

diabetes or heart diseases1, high blood pressure from or hyperlipidemia in case of too high fat intake. The

cost of millions has been spent on the obesity problem. It also affects the provisions of insurance as well

as pension funds by raising the fee for the higher risk of diseases and fatality. In many developed countries,

significant numbers of people have already been in. Not only developed countries but also developing

countries that obesity is a serious concern.2 Statistics show that obesity in China rose by 414percent in 20

years.3 In Thailand, the obesity growth rate was also phenomenal. Obesity is found among children about

14-15percent4(about 0.16 million obese children) and over 40percent among the monks(300,000 people),

1 Bell, S.J., Sears, B., “Low-glycemic-load diets: impact on obesity and chronic diseases." Critical Reviews in Food Science & Nutrition, 43(4), 2003, pages 357-77. 2 Mark Tran, Obesity soars to 'alarming' levels in developing countries (Jan 3, 2014) https://www.theguardian.com/global-development/2014/jan/03/obesity-soars-alarming-levels-developing-countries 3 Ruth S.M. Chan, Prevention of Overweight and Obesity: How Effective is the Current Public Health Approach (2010) 4 Obesity in Children https://www.samitivejhospitals.com/en/obesity-in-children/(Dec 18 2017)

6

which is the remarkable number as well as growing among adults whose ages are over 18 from last

decades.5

The rise of obesity and chronic illnesses has prompted many parts of the Thai government to apply many

methods to reduce the growth of obesity. Many methods are introduced in response to those problems

such as publishing guidelines concerning health issues, the extra premium in health insurance for obese

people6, lectures about diseases in universities and schools, or commercials on media. Nevertheless, those

methods seemed to have not effectively worked since people still could decide not to change their dietary

behaviors. Thus, the Thai Government started to use tax policy to decrease the rate of obesity regarding

the nutritional profile of the beverage. Taxes such as sugar, fat, and sodium tax were applied to the foods

and beverages which are considered risky to health.

The first country that started to impose a tax on sugary food or beverages was Denmark in 1930s with

soft drink tax. Hungary and France followed Denmark by imposing the tax on sugary beverages in 2011

and 2012, followed by many countries in Europe, America, and Asia. Such tax is commonly recognized as

“soda tax” while it applies not only to sodas. Thailand has introduced a sugar tax in beverages in 2017 and

recently revised by raising tax rates in 2019. Fat and sodium tax are still under discussion whether there

is a necessity. It seems a very remarkable idea to use tax as a solution for obesity and other chronic

diseases problem. Not only it generates revenue for infrastructures, facilities, educations, or health

projects, but it can perhaps also help to decrease the rate of obesity and other diseases. However, the

effectiveness of this solution is questionable and can be challenged regarding the rightfulness and the

level of intervention. How about the economic impacts which arise from such imposition? The food

industry rounds up about 23percent of Thai GDP; thus, the policy should not be made too intensely. The

change should be made slowly and gradually enough for allowing the industry to reshape. Sugar is also

one of the primary commodities which are manufactured around the country. It is a challenge for

regulators to pass the law which effectively controls obesity as well as maintaining the efficiency of

economics.

5 Thai Monk suffer from Obesity https://aawsat.com/english/home/article/1394226/thailands-monks-suffer-obesity (13 September 2018) 6 Dr. Wallop Pornreungwong, being obese might get you the extra premium in the insurance. www.gotoknow.org/posts/110815

7

The thesis would be structured as follows: Chapter 2 discusses health issues and concerns and its

economic impacts and the strategies that the government tried to apply to internalize externalities.

Chapter 3 discusses the economic theories behind the sugar tax. Chapter 4 analyzes regulations and their

effectiveness regarding the concrete obesity differing results within three countries and Thailand. Chapter

5 addresses the challenges and weaknesses of the current policies, and Chapter 6 rightfulness of the sugar

tax and conclusion.

1.2 Research Question

This thesis thus seeks to answer whether it is rightful for the government to intervene in the personal

preferences in consumption and whether sugar tax is an effective tool to reduce obesity in Thailand as

well as identifying challenges of the current legislation.

This thesis argues that in the free market, the people shall have the right to freely allocate and exploit

resources and products. But in some case that such freedom generates cost to the society, it is necessary

for the government to intervene and impose some methods which offset such social cost. Freedom of

choice thus shall be partly sacrificed for the public interest. Moreover, such intervention must be made

for the public welfare as the ultimate goal. The method must be well selected and designed to the highest

level of effectiveness while posing the least potential costs. Even though the current tax policy could

perhaps reduce some consumption of unhealthy foods and beverages, it is not effective now and could

not solely solve obesity. Some revisions shall be made for greater effectiveness.

This thesis will also analyze the rightfulness of intervention regarding legal and economic theories. By

restricing rights and liberties of the people with the police power, the state shall act in accordance with

the provisions under the constitution. This thesis will cover those provisions and analyze whether the act

of the state satisfies all components or not. Moreover, taxation power which means to be for raising

revenue can also impose the restriction effects besides its primary goal. There are no provisions that limits

the power of taxation as the police power yet the taxation principle can still be the justification of the

rightfulness of the tax. In order to be considered as a rightful tax, it has to be legal and also appropriate.

Some tax could be legal whereas not rightful since it misses some components under the principles or

when the cost outweighs benefits regarding economic theories. This thesis will cover all of these issues.

8

1.3 Objective of the Study

(1) To study health issues which are caused by overconsumption and obesity and its consequence to

economics as well as the strategies that the government try to resolve it;

(2) To find whether the intervention of the consumption by the Thai government is rightful or not

according to economic theories and the constitution law of Thailand as well as other legislation.

(3) To analyze the provisions of sugar tax policies and their effectiveness in solving obesity as well as

chronic diseases.

(4) To do a comparative study of the abovementioned legal issues relating to sugar tax under Thailand

and three other jurisdictions.

(5) To propose legal solutions to amend the existing laws and practical proceedings in order to carry out

more effectiveness in reducing obesity.

1.4 Methodology

The study methodology is based on documentary research by emphasizing scientific, economic and legal

texts, Thai and foreign legislative provisions, articles and publications, online databases as well as experts’

opinions as well as statistics.

1.5 Major findings

The sugar tax was found to work effectively on reducing consumption of sweetened beverages

temporarily. Evidence shows the reduction of sugary beverage consumption in the short term yet after

few years; the consumption rose higher than before the implementation of the tax. The consumers also

swapped to other high sugar alternatives such as chocolate, desserts, retail coffees, or cacao. Price per

unit keeps increasing along with the rise of consumption. The revenue deriving from tax is far behind the

externalities and thus insufficient to offset and internalize. Sugar tax by itself is not the best solution for

reducing obesity, which has more factors besides soft drinks and sugary beverages.

Regarding the rightfulness of the tax regarding economics and legal aspects, it is likely to be rightful. Under

the economic theory, some theories such as Freedom of choice theory or consumer sovereignty suggest

that consumers shall judge their consumption and have the freedom in their lives. However, some

consumption has shown posing some negative impacts on society when let run without any controls.

Those negative impacts can be slowly gone without any intervention, and the society might need to bear

9

such cost unnecessarily. Therefore, the government might have the right to internalize those externalities

at the reasonable and as necessary extent. Obesity has become a global concern for decades and shows

steady growth. Causes of obesity are various, yet the major factor is overeating. When consumers are

allowed to consume freely, some might overconsume and become obese. Being obese costs millions to

the government yearly from the diseases that are found in obese individuals. It is thus can be considered

as a disease that costs society. The government thus shall have the power to act paternalistically to

intervene in the consumption to the level that poses fewer externalities or if possible, totally no

externalities.

In conclusion, legality of sugar tax depends on the interpretation of the justification of the decision-makers

and the court. According to the constitution, it seems to lack the rule of law compliance component by

missing the equitability by not cover all externalities equally but rather target only specific group of

manufacturers. However, sugar tax was imposed by the power of taxation, which has different criteria

and limitations from the police power. The power of taxation was granted to the excise department as

well as the revenue department. The discretion was fully given and made as it sees necessary. Therefore,

sugar tax is legal under the legislation. However, there is some tax principle which it should follow to be

rightful, which includes 3 components. It was made in a simple way and at the appropriate amount which

does not put an unreasonable burden on the people. However, the sugar tax targets only specific products

while neglecting others who also constitute externalities, which makes it does not meet the equitability

component. Therefore, it is a legal tax but rather be not rightful under the tax principle.

Rightfulness consists of legality as well as appropriateness. In order to be appropriate, the other aspects

should also be taken into an account such as paternalism or public interest with respect to freedom of

choice. According to those theories, the sugar tax does consider all of those theories. It was imposed with

the intention and purposes with the legitimate grounds at the amount which barely make the change of

the price for the people. Most people are not restricted or losing any rights of consuming the products. It

is true that this tax might not be an effective device of solving obesity problems as the evidence shows

the little difference after the imposition. Nevertheless, it does have paternalistic nature while respect the

freedom of choice of the people by does not put the unreasonable burden on the people. It does not add

up value that exceeds the affordability zone of the people or pose any ban on any products; thus, it does

not neglect people’s freedom of choice. However, the rate was set at the ineffective and insufficient to

makes it achieves the public interest goals. When the tax which was made for public interest but lacks

10

ability to achieve such goal, it might not be rightful. This tax, therefore, might be considered legal but not

rightful under economics aspects as well as the principle of taxation aspect.

Chapter 2: OBESITY AND ITS PROBLEMS

2.1. Obesity

2.2.1 Obesity definition and health impacts

Obesity is generally defined as the condition that the ratio between weight and height exceeds the

appropriate level. Other factors besides body size or waist size, such as body fat level under the skin or

organs, are also used for assessing whether that condition is obese.7 Obesity can be roughly determined

by Body Mass Index (BMI) in adults. BMI can be calculated by using a person’s weight in kilograms divided

by the square of his height in meters (𝑤𝑒𝑖𝑔ℎ𝑡(𝑘𝑔)

ℎ𝑒𝑖𝑔ℎ𝑡(𝑚)2 = 𝐵𝑀𝐼). This index is not accurate when it is applied to

the athletes due to the higher muscle mass and the inability of distinguishing internal fat and fat under

the skin.8 CT scans and MRIs are a more accurate way to measure the risk of body fat, yet they are an

expensive option. Thus, BMI is more commonly used among practitioners. In the young adult, the average

levels of body fat are considered to be 12–20 percent body weight in males and 20–30 percent body

weight in females, while levels of > 25 percent body weight in males and > 33 percent body weight in

females can be considered obese.9

After the definition part, the next issue is going to be why obesity matters. The hot discussion regarding

obesity which is whether an individual can be considered as being in good health while being obese with

normal blood pressure, normal cholesterol, and normal blood sugar. One extensive study from

Birmingham10 University which analyzes the GP records of 3.5 million people(18 years old or older) from

across the UK between 1995-2015. The result shows that in the obese individual compared with the

7 Adela Hruby, PhD, MPH and Frank B. Hu, MD, PhD, MPH(2016),The epidemiology of obesity: A big picture, (https://www.ncbi.nlm.nih.gov/pmc/articles/PMC4859313/) 8 Alexandra sifferlin, Why BMI is not the best measure for weight(or health)(2013), http://healthland.time.com/2013/08/26/why-bmi-isnt-the-best-measure-for-weight-or-health/ 9 F. Xavier Pi-Sunyer(2000), obesity criteria and classification p.505-509 10 Institute of Applied Health Research, University of Birmingham (19 May 2017), Metabolically Healthy Obese and Incident Cardiovascular Disease Events Among 3.5 Million Men and Women https://www.birmingham.ac.uk/news/latest/2017/05/'Healthy-obesity'-is-a-myth-study-suggests.aspx

11

normal weight individual, and there is 49 percent higher risk of coronary heart disease, 7 percent higher

chance of stroke, and 96 percent.11 The study concluded that being obese and healthy is a myth. Being

obese with normal blood pressure, normal cholesterol, and normal sugar blood is still risky for getting

diseases and cannot be considered as healthy. In 2014, the EU court also ruled that obesity at a certain

severity such as inability to work or workability is limited can be classified as disability.12 Experts from

health section of universities in the US gave several opinions and explanations regarding obesity is a

disease while some are hesitant to conclude as it is a disease.13 However, Mary Jane Minkin of University

of Arizona refutes that obesity is a disease on the ground that it is not always dangerous, and obese

individuals can still be healthy. There will not be the answer to whether obesity is absolutely a disease,

yet what all studies show is a higher risk to diseases than normal healthy people. Being at a higher risk to

diseases might not be a disease but also not in a healthy condition in the long term also.

The more obese that individual is, the more prone to diseases he gets. Obesity shows many adverse

effects, some of them can lead to fatality. Obesity can cause these following diagnoses:14

1) High blood pressure15

Like the leech, unnecessary extra fat tissue in the body requires oxygen and nutrients to stay alive, which

forces the blood vessels to generate more blood to the fat tissues.16 The heart needs to unnecessarily

work harder to pump more blood through additional blood vessels. When the blood circulating is

increased, it will put more pressure on the artery walls and increases the overall blood pressure. Besides

blood pressure and heart rate issues, the ability to transport blood through the vessels would also be

depleted.

2) Diabetes

11 Id. 12 Council Directive 2000/78EC 13 Carey Rossi, Is obesity a disease (Jun 24,2013), https://www.prevention.com/health/a20454246/debate-is-obesity-a-disease/ 14 Maximilian Tremme, Ulf-G. Gerdtham, Peter M. Nilsson and Sanjib Saha (2017), Economic Burden of Obesity: A Systematic Literature Review 15 Stanford health care, https://stanfordhealt Stanford health care, https://stanfordhealthcare.org/medical-conditions/healthy-living/obesity.html hcare.org/medical-conditions/healthy-living/obesity.html 16 Id.

12

Obesity plays a significant role in causing type 2 diabetes. This diagnosis was more predominantly found

and began in adulthood, but now it is also commonly found among children. Obesity encourages the body

to resist insulin that helps to regulate blood sugar. When the body is resistant to insulin, the blood sugar

would be uncontrollably elevated. This stage is called hyperglycemia, which will cause diabetes to

patients. Moderate levels of obesity can increase the risk of diabetes by far more than average people.

3) Heart disease

Atherosclerosis17 is commonly found about ten times more in obese people compared to those who are

not obese. The common atherosclerosis is Coronary artery which occurs from the accumulating fat get

clogged in the arteries, which function as the vessel that transport oxygen-rich blood to the heart muscle.

When the arteries are narrowed, the ability to transport blood would be decreased blood flow. When the

blood flow cannot enter the heart muscle even in a short time, the dead heart cells would occur and result

in heart disease.

4) Joint problems18

Extra weight in obese people can put an excessive amount of load on knee and hip joints and damage

them in the long term.19 Joint replacement surgery, while commonly performed on damaged joints, may

not be a suitable option for an obese person because of the fragility of the artificial joints.20 It can even

cause further damage.21

5) Sleep apnea and respiratory problems22

Sleep apnea makes people temporarily stop breathing, interrupt sleep throughout the night, and cause

drowsiness during the day. Heavy snore is also typically found in the heavy people. Besides sleep apnea,

respiratory problems are also typical among obese individuals. During the sleep, extra bodyweight would

add pressure on the chest wall and squeeze the lungs and disrupt to the breath. This diagnosis is also

relevant to high blood pressure.23

17 hardening of the arteries 18 Pediatric Obesity | Children's National. (n.d.). https://childrensnational.org/choose-childrens/conditions-and-treatments/obesity 19 Id. 20 Id. 21 Id. 22 Id. 23 Id.

13

6) Cancer

Overweight women are found having risks of a variety of cancers, including breast cancer, colon,

gallbladder, and uterus.24 The common cancers that are found in overweight men are colon cancer and

prostate cancers.25

7) Metabolic syndrome

The National Cholesterol Education Program defines metabolic syndrome as “a complex risk factor for

cardiovascular disease.”26 Abdominal obesity, elevated blood cholesterol or blood pressure, insulin

resistance with or without glucose intolerance, the elevation of blood components that cause

inflammation and elevation of blood vessels clogged are the primary components of metabolic syndrome.

About one-third of overweight or obese persons in the US have exposure to metabolic syndrome.27

8) Psychosocial effects 28

In a culture where beauty is judged by the physical attractiveness, being obese rather than medium or

thinness can result in many negative ways that can be hurtful for big size people.29 In many cases, the

ones who are overweight or obese are symbolized as lazy, clumsy, or unattractive people by society. In

some parts of the world, being fat can be a joke for people. Some reactions from the society can be

expressed in bias or discrimination treating, bullying in person or online.30 Some discrimination can be

overreaching to the insane level such discrimination in salary, career application, or relationship.31

2.2.2 Causes of obesity

Bodyweight is the result of diets, genetics, metabolism, environment, behavior, and culture.32 The most

common causes of obesity are overeating and physical inactivity following with other factors.33

24 Id. 25 Id. 26 Id. 27 Id. 28 Id. 29 Id. 30 Id. 31 Id. 32 Jerry R. Balentine, DO, FACE Jerry R. Balentine, DO, FACEPP,Obesity(5/18/2018), https://www.medicinenet.com/obesity_weight_loss/article.htm#what_are_the_health_risks_associated_with_obesity 33 Id.

14

1) Overeating

Overeating can occur when the total calorie intake from macronutrients, including carbohydrates, fats,

and protein, exceeds the daily expenditure level. The proportion between calorie intake and energy one’s

spending on daily activities. When people consume high calories food (mostly high fat or sugars) but do

not burn off the energy through exercise and physical activity, the excess energy will be stored by the

body as fat.34The fat cell would be either enlarged or created more numbers of them. When the calorie

intake decreased from consuming fewer calories than burning up or activity level increased, the stored

fat would be shrunk along with the waistline.

These days, people tend to exceed calorie intake more easily due to the larger serving size of the food in

most places. In the last century, fast-foods were offered only in one size. Whereas now the portion sizes

have mutated, not only fast food but also desserts and food in the restaurants. From cookies and cake to

pasta and steaks. The average fries from McDonald's contains three times more calories than when the

business began. A single "large-sized or kingsize" meal may contain 1,500–2,000 calories, which is all the

calories that most people consume in the entire day. One research shows that people often eat without

awareness when the food is ready in front of them even if they begin to feel full. 35 Unsurprisingly, eating

high-calorie foods became more common and easier for people since they are readily available at a more

affordable price than lower-calorie choices like salads and whole fruits. Eating fat is not a problem so long

as the proportion is reasonable. Research shows that the fat content of diet has gone down since the early

1980s. Many low-fat foods are actually more risky to obesity than the regular one. In low-fat food, fat is

removed and substituted with excessive amount of sugar to compensate their taste and palatability. While

fat has some nutritional benefits in regulating hormone system, the sugar has no benefits.

2) Genetics36

34 Obesity Causes, Treatment & BMI - Medicine net https://www.medicinenet.com/obesity_weight_loss/article.htm. 19 May. 2019. 35 Why people become overweight, Harvard health publishing (04/11/2017), https://www.health.harvard.edu/staying-healthy/why-people-become-overweight 36 Id.

15

There is more chance to be obese for a person if one or both of his parents are obese. Genetics can affect

hormones involved in fat regulation, yet this case is not so typical.37 Leptin deficiency is one of those

uncommon traits which cause obesity. Leptin is generated in fat cells and the placenta. Leptin functions

as weight control by signaling the brain to eat less when body fat stores are too high. When this hormone

is dysfunction, or the body cannot produce enough leptin or leptin cannot signal the brain to eat less, the

appetite would be infinite, and obesity occurs.

3) A diet high in simple carbohydrates(sugar)38

The diet which contains high simple carbohydrate can cause blood sugar to spike up, which induce the

body to produce more insulin in regulating the amount of glucose from the blood. The effect of insulin is

the inhibition of the breakdown of fat cells and stimulates fat store. It makes the body stop burning fat

and absorb the sugar from blood to be energy. Every food has different ability to raise blood sugar.

Glycemic index(GI)39 is a scale that shows the ability to raise insulin after consumption. The food with

higher GI can raise more insulin. The food that usually contributes to weight gain is the simple

carbohydrate such as white rice, sugar, beer, juice or soft drinks because they are more rapidly absorbed

into bloodstream and can raise blood sugar abruptly. When insulin is released more, it is likely going to

store the excess calories as fat.

4) Frequency of eating 40

Most people might think that the one who eats more often is often more prone to obesity, yet science

shows the controversial result. Many reports show that overweight people eat less often than the smaller

size one. People who eat small meals four to five times a day are likely to have lower cholesterol and fat

as well as more stable blood sugar level than the one who eats two or three large meals a day. The reason

behind is that insulin would not likely elevate as much as the bigger meal due to the lower carbohydrate

intake in each meal.

5) Physical inactivity41

37 Id. 38 Id. 39 more detail in Annex 40 Why people become overweight, Harvard health publishing (04/11/2017), https://www.health.harvard.edu/staying-healthy/why-people-become-overweight 41 Why people become overweight, Harvard health publishing (04/11/2017), https://www.health.harvard.edu/staying-healthy/why-people-become-overweight

16

The less active one is likely to have a slower metabolism than active people. When the calorie intake does

not exceed the calories in daily activities and metabolism, weight gain is likely not to occur. The National

Health and Nutrition Examination showed strong evidence supporting that physical inactivity is correlated

with weight gain.

6) Medications42

Some medicines can pose many side effects, including weight gain. For instance, antidepressant,

anticonvulsants, valproate, diabetes medications, hormones, and antihistamines are shown to cause

weight gain in some individuals.

7) Psychological factors43

For some people, emotions can affect their appetite and eating habits. Many people excessively consume

when they have boredom, grief, stress, anger, or depress. Individuals who have these issues might need

some treatment to prevent the undesirable consequences of overeating.

8) Diseases44

Obesity is also commonly found in some diseases such as hypothyroidism, insulin resistance(when insulin

dysfunction), some syndromes, or hormonal dysfunction.

9) Social issues45

Some evidence shows the connection between social issues and obesity. In some countries, healthy food

is more expensive and more difficult to find than unhealthy food. For instance, in the US, healthy food

could cost from 7-12 USD per meal, excluding tips while the same amount of money can afford a whole

meal with refillable sodas in McDonald's. The problem thus pushes the consumers to unhealthy

substitutes. The one who needs to eat for a living would thus choose the option that makes them feel full

regardless of nutrition with the lowest amount of cost.

42 Id. 43 Id. 44 Id. 45 Id.

17

Another study also supported the idea in a way that overeating46 causes obesity, not sugar.47 Fruits and

milk, which contain significant amount of sugar, were a part of a daily diet of humans worldwide. The

obesity problem was more recent than the time human started consuming fruits and dairy products.48 It

also says that

“It is important to state at the outset that there is no direct connection between added sugars intake and

obesity unless excessive consumption of sugar-containing beverages and foods leads to energy imbalance

and the resultant weight gain.”49

However, the concern of sugar effects is because 1000 calories of the solid food can make people feel full

up to 5-6 hours, yet the liquid carbohydrates would only fill people up to 1 hour.50 Also, when people feel

starving again, it is very likely that he will consume more calories. This process also occurs differently

among individuals’ fatness and activity levels.51 The fatter one is, the more chance he exceeds his daily

calorie level. However, the monosaccharide sugar carbohydrate can cause insulin to spike up to regulate

the sugar level in the bloodstream and store as fat.52 Protein can perhaps cause fat storage when

consumed excessively, yet it could not prove that protein causes fat storage well since high protein

sources also have high fat. Dietary fat is very caloric dense compared with carbohydrate and protein.53

Thus it can easily add up and make total daily caloric intake exceed the reasonable level. After

consumption, fat can be either burnt when neither excess carbohydrates and protein available or stored

as body fat.54 The more carbohydrate is consumed, the less fat should be consumed. Nevertheless,

another study suggests that high fat can shut off brain’s hunger and craving center and results in less

46 Eating more than daily calories need which can be excessive amount of carbohydrate, protein or fat. 47 Murphy SP, Cancer Research Center of Hawaii, University of Hawaii, The scientific basis of recent US guidance on sugars intake(2003), https://www.ncbi.nlm.nih.gov/pubmed/14522746 48 Id. 49 Id. 50 DiMegglio DP,Liquid versus solid carbohydrate: effects on food intake and body weight(2000), https://www.ncbi.nlm.nih.gov/pubmed/10878689 51 Michael Matthews(2015), You’ll Stop Worrying About Sugar After Reading This Article, https://www.muscleforlife.com/sugar-facts/ 52 Body Fat Storage and Insulin: How They Affect Diabetes Management, https://inbodyusa.com/blogs/inbodyblog/body-fat-storage-and-insulin-how-they-affect-diabetes-management/ 53 9 calories for 1 gram of fat and 4 calories in 1 gram of carbohydrate and protein. 54 Rising R, et al. Food intake measured by an automated food-selection system: relationship to energy expenditure. Am J Clin Nutr. (1992)

18

caloric intake.55 It also shows that high-fat with low-carbohydrate can cause weight loss better than the

high-carbohydrate with low-fat.56 This discussion might still go on endlessly, yet the fact that

overconsumption from either macronutrient can cause obesity.57

2.2.3 Current situation of obesity in Thailand and worldwide

While obesity is preventable, the current situation of obesity is still uncontrollable and get attention from

political agendas around the world. According to statistics of WHO, the number of obesities went triple

since 1975. In 2016, nearly 2 billion (39percent) adults, 18 years old or older were overweight, and over

650 million (13percent) were obese.58 About 41 million young children under five years old are

overweight. The countries which have the highest obesity rate are Nauru and Pacific islands, Kuwait, USA,

Jordan, Saudi Arabia, Qatar, and many countries in the Middle East.59 While the least obese rate countries

are Asian and some African countries.60 In Thailand, about 23.8 percent of men (age20+) were overweight,

and 28.9 percent of women at the same age are overweight.61 While 7 percent of men(age20+) are obese,

and 12 percent of women(age20+) are obese.62 The latest information in 2014-2016 shows the slight

increment of obesity and overweight by 3-5percent.63 64 The goal it plans to reach by 2025 is to reach the

WHO global target, which limits to 5percent in adult men and 10percent in adult women.

55 Mark Hyman MD, why fat doesn’t make you fat!(2016), https://drhyman.com/blog/2016/01/08/why-fat-doesnt-make-you-fat/ 56 Id. 57 Body Fat Storage and Insulin: How They Affect Diabetes Management, https://inbodyusa.com/blogs/inbodyblog/body-fat-storage-and-insulin-how-they-affect-diabetes-management/ 58 Obesity and Overweight, WHO(2018), https://www.who.int/news-room/fact-sheets/detail/obesity-and-overweight 59 Most obeses countries 2019, http://worldpopulationreview.com/countries/most-obese-countries/ 60 https://www.telegraph.co.uk/travel/maps-and-graphics/the-most-obese-fattest-countries-in-the-world/ 61 Thailand obesity information(2009),https://www.worldobesitydata.org/map/overview-adults#country=THA 62 Id. 63 Overweight rate went up to 33percent in men and 43percent in female, https://www.adb.org/sites/default/files/publication/236536/adbi-wp703.pdf p.4 64 World Health Organization - Noncommunicable Diseases (NCD) Country Profiles, (2018) https://www.who.int/nmh/countries/tha_en.pdf?ua=1

19

2.2. Obesity and economic impacts

From what previously demonstrated, all diagnoses and diseases generate a medical cost for treatment

and management of diseases as well as indirect costs such as sickness absence and informal care.65 It can

be seen that obesity requires significant resources from health and public sectors for medication and

treatment while it is preventable. One study from Thailand shows that obesity imposes a substantial

economic burden on Thai society, especially in terms of health care costs.66 The government has applied

many strategies to redress the obesity problem from education to intervention. It costs millions for

campaigns to fight against obesity. However, for intervention, cost of externalities must be precisely

addressed for maximum effectiveness.

One of the research that estimates the cost of obesity in Thailand was conducted in 2014 by Paiboon

Pitayatienanan.67 It was a prevalence-based illness study. It covers 12 co-morbidities including colon and

colorectal cancer, breast cancer, endometrial cancer, hyperlipidemia, diabetes mellitus, depression,

hypertension, ischemic heart disease, pulmonary embolism, stroke, gall bladder disease, and

osteoarthritis from both inpatient and outpatients services. Each cost, including health care cost, Cost of

productivity loss due to premature mortality, and cost of productivity loss due to hospital-related

absenteeism was calculated with different methods. The result shows that68 the health care cost

attributable to obesity was estimated at 5,584 million baht69 or 1.5percent of national health expenditure.

The highest section of the cost is the cost of productivity loss associated with obesity was estimated at

6,558 million baht (about 54percent of the total cost of obesity). It is followed by the cost of premature

mortality that was estimated at 5,864 million baht. Finally, cost of hospital-related absenteeism was

estimated at 694 million baht. Ultimately, the total expense was estimated at 12,142 million baht (725.3

million USD, accounting for 0.13percent of Thailand’s Gross Domestic Product (GDP).

Another study of Yot Teerawattananon shows that the economic cost of obesity can be estimated to be

about 404 million USD or 12 billion baht annually. Among these, 46percent or 186 million USD is due to

65 Maximilian Tremme, Ulf-G. Gerdtham, Peter M. Nilsson and Sanjib Saha (2017), Economic Burden of Obesity: A Systematic Literature Review 66 Paiboon Pitayatienanan,Economic costs of obesity in Thailand: a retrospective cost-of-illness study (2014), https://www.ncbi.nlm.nih.gov/pmc/articles/PMC4109797/ 67 Paiboon Pitayatienanan. Economic costs of obesity in Thailand: a retrospective cost-of-illness study (2014), https://www.ncbi.nlm.nih.gov/pmc/articles/PMC4109797/ 68 Id. 69 The estimated costs in this study included health care cost, cost of productivity loss due to premature mortality, and cost of productivity loss due to hospital-related absenteeism.

https://www.ncbi.nlm.nih.gov/pmc/articles/PMC4109797/

20

direct health care costs for both out-patient and in-patient care. The remaining (54percent or 218 million

USD) comes from indirect costs including opportunity cost related to premature mortality (195 million

USD or 5,864 million baht) and hospital-related absenteeism (23 million USD or 694 million baht).70

Studies from 32 other countries, including USA, France, New Zealand, and China also show the result in

the same line.71 It is evitable problem which the government and regulators need to solve or mitigate. Tax

policy has been chosen as a tool for halting obesity rates globally.

70 Yot Teerawattananon, Obesity in Thailand and its economics cost, No.703 (2017) https://www.adb.org/sites/default/files/publication/236536/adbi-wp703.pdf p.11 71 The economic burden of obesity worldwide: a systematic review of the direct costs of obesity, Witrow and Alter(2011), https://onlinelibrary.wiley.com/doi/full/10.1111/j.1467-789X.2009.00712.x “Taking only direct cost into an account”

CHAPTER 3: TAX FOR BEHAVIORS CONTROL IN THEORIES

As discussed in the previous chapter, researches proved that obesity could improve the chance of having

numerous chronic diseases which some could be fatal. This chapter is going to discuss the method that

uses for mitigating the severance of the obesity situation worldwide. Intervention is the practice that is

chosen by governments to control the consumption and make the desired outcomes happened. It will

start with rational of choice theory, which is the theory that stands against intervention and suggests that

individuals should have the freedom in the consumptions.

The next part is going to be about the situation where intervention is necessary or so-called market failure

in order to maintain the public welfare and interest. Then the discussion about pigouvian tax, which is the

solution for market failure by Pigou the economist in 20th century and its limitation as well as downsides.

After that, the theory of effective designed tax would be discussed. Price elasticity of Demand, which is

one of the significant determinants for designing the tax, would be discussed after. Lastly, the previous

failure of intervention cases would be shown.

3.1 Freedom of choice and Rationale of choice theory

As we know that in the free market, individuals shall entitle the right to allocate and consume as he desires

or sees available to him.72 Freedom of choice is the terminology that explains such phenomenon. Freedom

of choice or sometimes referred as consumer sovereignty is a concept that states that consumers shall

have the right and freedom to choose different goods and services. The only person whose behaviors we

can control is only ourselves.73 All we shall do is providing information to another person.74 As Ludvig von

Mises stated,75 “The democracy in the market consists of the fact that people themselves make choices

and that no dictator has the power to force them to submit to his value judgments.” When the

government intervenes the market activities, it denies freedom of choice and causes the free market to

be no longer free market.

Besides freedom of choice theory, consumer sovereignty also supports the decision of the consumer in

choosing their consumption freely. Under this theory, the consumer shall be the one who has sovereign

72 Hall, Robert E.; Lieberman, Marc, Microeconomics: Principles & Applications. Cengage Learning (2009) p. 42. ISBN 9781439038970. 73 William Glassor, Choice theory (1998) 74 Id. 75 Ludvig von Mises, Human action(1949) p.388

22

power in judging his or her own welfare in life.76 The government should always not dictate or decide

paternalistically on behalf of the entire population. An activity that one perceives as a good or desirable

decision might be a bad or undesirable decision for another. This theory also states that the consumer will

act on the most reasonable or efficient for his economic power or capability. The rational choice theory

also suggests that consumers will act in a reasonable way for their advantages by stating that individuals

will rely on rational calculation and choose the decision which maximizes their advantages in any situation

and minimize their losses by avoiding the other decision. Rational choice theory explains social

phenomena as outcomes of the rational decision of the individual and what ought to behave for the

maximizing resources.77The key elements of this theory are individual preferences, beliefs, and

constraints. The theory starts with the idea that individuals have preferences and decide by relying on

those preferences.78 The outcome could be either positive or negative. Preferences are different among

individuals depending on their backgrounds, cultures, or personal habits. Beliefs refer to perceived cause-

effect relations that influence individuals to think of the outcome of a certain decision. The constraint is

the limit factor which constrains the individual to one decision. For instance, the wealthiness at the

moment that individual was making a decision.79

Regarding this theory, when personal preferences are either intervened or affected by the regulation

which constraints the price of the products, budget or influence the attitude toward a certain product,

the possibility of different preferences that affects decision.80 For instance, a regulation that poses tax on

the products would cause the price to increase and would work as a constraint that affects the preference

of individuals or the regulation that prohibits or illegalize one product. Individuals then could perhaps

make the different decision from the one without regulation. However, behavior of human cannot be

predicted only from these theories. Consumers’ behaviors can turn out differently from what the

economists or regulators expect. Behavioral economics81 comes to explain the irrationality of human. It

76 Pearce, David W. (1992). Macmillan Dictionary of Modern Economics. 77 Rafeel Wittek. Rational choice theory (January 2013) 78 Jonathan Levin and Paul Milgrom, Introduction to the Choice Theory (September 2004), https://web.stanford.edu/~jdlevin/Econpercent20202/Choicepercent20Theory.pdf 79 Id. 80 Australian government, department of finance and deregulation, Influencing Consumer Behaviour: Improving Regulatory Design p.6, https://www.pmc.gov.au/sites/default/files/publications/Influencing_consumer_behaviour.pdf 81 a method of economic analysis that applies psychological insights into human behavior to explain economic decision-making.

23

explains that humans are irrational and incapable of making good decisions in many cases.82 Since humans

are emotional and easily allow emotions to control the behaviors rather than the logic, they could make

decision which is not rational.83 In order to formulate effective regulations, one must not rely only on

rationality as a presumption, irrational situations shall also be taken into an account.For example, let’s

suppose that there is a man named Logan, who is in the obese condition. If Logan wants to lose fat and is

informed about the calories of each food he consumes, he will select only the low calories food and avoid

the extra unnecessary calories. Behavioral economics states that even if his goal is to lose weight, other

factors such as his mind, bias, and social thoughts will influence his decision. When the information is

made in a way that makes him feel it is okay to consume desserts, Logan could end up with the decision

that is contrary to his weight loss goal.84 Consequently, when the regulator imposes regulation, Logan

might not decrease consumption even if the price is higher. A human who still has emotions and bias

should not always be presumed to make rational decisions, which here is decreasing consumption.

3.2 Market failure and intervention for public interest

In the ideal free market in Adam Smith’s theory, resources are allocated by the invisible hand with no or

little intervention from the state such as taxes, tariffs, quotas or other forms of centralized interventions.85

In practice, sometimes the resource allocation is inefficient due to externalities or information asymmetry,

the intervention of the government or state is thus unavoidable. When some goods are overconsumed,

the adverse effects could perhaps outweigh the benefits. Since the individual rational decision is not equal

to the rational outcome of the public, intervention is, therefore, a mechanism guide the allocation to the

efficient equilibrium. Michell and Simmons86 have stated, “Because no human institution is perfect, it is

easy to find imperfections or 'failures.” Therefore, the consumption which is perceived harmless might

cause unexpectedly negative results. It is true that consumers shall have the right to decide regarding

freedom of choice theory yet in some circumstances where their rationality or decisions cause the

negative impacts or externalities to the society, their needs have to be sacrificed for public welfare and

interests. This situation leads to intervention by the state, which is explained under public interest theory

and economic patriotism, which mention the justifications of intervention.

82 Id. p.15 83 Will Kenton (May 2019), Behavioral economics https://www.investopedia.com/terms/b/behavioraleconomics.asp 84 Id. 85 Mark Orliztky, free market, https://www.britannica.com/topic/free-market 86 Wallis J., Dollery B. (1999) Market Failure and Government Intervention. In: Market Failure, Government Failure, Leadership and Public Policy. Palgrave Macmillan, London

24

Public interest is the theory that suggests the intervention of the government to internalize externalities

and maintain the efficiency of the market.87 Economic patriotism, which is closely similar in the concept,

also reaffirms that the benefits of homeland rank higher than individual economic interests. Intervention

thus is a rightful thing to be committed by the government. Historically, during the war, the benefits of

the state supersede any individuals’ benefits. The survival of the state is thus the most important concern.

After the war, the idea did not completely disappear and still stay behind economic activities. In order to

make the economics of the state efficient, the welfare of the public, in general, must be maintained. This

theory could perhaps refute the consumer sovereignty theory by opposing that sometimes the

intervention could be necessary for the unreasonable preferences or decisions of individuals. One

experiment from Mexico88 compared the result of providing cash versus food to help the poor community

and let them decide their own economic activities. The result shows that people who receive cash tend

to spend it on unhealthy foods rather than the ones who are bound to get only healthy food. This could

be the ground for intervention since people act irrationally sometimes. According to this theory, under

constitutions of many countries such as the US, UK or Thailand has the part that gives the power to the

government to intervene in the consumption when it is necessary for safety, health or welfare of the

citizens. Most of these powers are limited under specific circumstances that have sufficient justification

as well as necessity. When the state acts beyond those boundaries on any other grounds which fall outside

the exemption which can be raising revenue or advantaging one party in the market, the court usually

sustains such enactment of regulations. The limitation of such power varies among countries from the

different forms of government or state, culture, or mindsets. The socialist or communist states would

have a different boundary of limitation from capitalist states. Even if the regulations are enacted in

accordance with the limit of these boundaries, it might be insufficient to conclude that intervention is

rightful according to public choice theory.

The governmental institutions are still run by humans who have emotions, greed, and the mindset of

keeping private interest. Thus, this theory may discriminate particular social groups or sectors who are

not related to the private interest of politicians and bureaucracies.89 These theories received many critics

regarding the impracticality. One of the largest weakness of it is little possibility of success. Such

87 Johan den Hertog(2003),Public and private interest in regulation 88 Cunha, Jesse M. (1 April 2014). "Testing Paternalism: Cash versus In-Kind Transfers". American Economic Journal: Applied Economics. 6 (2): 195–230 89 Ben cliff and Cornelia Wall, Economics patriotism in open economics(2013)

25

intervention must be appropriately conducted at a reasonable and effective level of intervention. In the

real world, political policies always favor one group or sector in society when there is a special interest

involves. Decision-making results could have come out in the opposite direction to majority of public’s

needs. Many decision makings are made for the private benefits of the regulators rather than the public.

The public choice theory thus explained the process of this by stating that the players in the market can

act in favor of their interests. The people can vote for the politician who keeps their private interest

through the policies. The politician could support the projects that cause externalities that potentially

make them wealthy, powerful, or receive popular votes.90 The bureaucracies can also be biased to the

policymaking. Thus, lobbyist or benefits offering is practiced to make the interests come in favor of one

side. The benefits could be in favor of the lobbyist and the government at the cost of the public. When

the externalities cost is not mitigated as well as public interests are not protected after the intervention,

government failure will happen. 91 Since government failure occurs after the intervention, intervention as

the first step must be carefully made. The intervention can range from restriction, price control, inflation,

or credit extension to subsidies.92 One of the most practiced intervention is government regulation,

especially tax or prohibition.93 Regarding the rule of supply and demand, when the price of product is

higher, the consumption would be reduced. Thus the tax which adds price of products up would change

the overconsumption quantity back to the efficient quantity.

3.3 Pigouvian tax, solution of market failure94

Pigouvian tax refers to the tax which is imposed in response to the externalities or so-called marginal

external cost, which causes negative effects to the bystanders who are neither users nor producers for

the greater social efficiency. It was invented by Arthur C. Pigou, the British economist who was the primary

90 Alda, Filip (2016). A Better Kind of Violence: The Chicago School of Political Economy, Public Choice, and The Quest for an Ultimate Theory of Power 91 Government failure, https://www.economicsonline.co.uk/Market_failures/Government_failure.html 92 Ludwig van Mises, Internationalism: an economic analysis (1999), https://oll.libertyfund.org/titles/mises-interventionism-an-economic-analysis 93 Johan den Hertog(2010), Review of Economics theories of regulation, https://www.uu.nl/sites/default/files/rebo_use_dp_2010_10-18.pdf 94 A Pigovian (Pigouvian) tax is a liquid waste, or effluent, fee which is assessed against private individuals or businesses for engaging in activities that create adverse side effects. Adverse side effects are those costs which are not included as a part of the product's market price. Pigovian taxes were named after English economist Arthur C. Pigou, a significant contributor to early externality theory in the Cambridge tradition. https://www.investopedia.com/terms/p/pigoviantax.asp

26

contributor to externalities theory in the 1900s in The Economics of Welfare.95 In his theory, when there

is consumption by a group of people, there will be the cost that they have to pay. That cost is called

"private cost." There could also be some negative effects or costs which are fallen on outsiders. Such cost

is called “marginal external cost.” In the free market condition, externalities are not taken into an account;

thus, it could lead to market failure when supply and demand cause market inefficiency and deadweight

loss that deteriorate social welfare. When there are externalities, they must be taken into an account for

the most efficient resource allocation. Besides market failure prevention, it also functions as revenue-

raising. Such revenue can be spent on subsidizing the alternative for consumption that the policymakers

want the consumers to switch to or ameliorate the externalities. When the price of the product is too low,

the consumption quantity would exceed the efficient quantity that gives no deadweight loss. Therefore,

the intervention of the government is necessary to raise the price to the level that the quantity of

consumption is as low as the efficient quantity. Getting to the efficient equilibrium where price and

quantity of consumption are efficient is the ultimate goal of Pigouvian tax. It is a very versatile method of

controlling consumption that can be applied in many situations. For instance, carbon tax for reduction of

carbon emission, sin tax for alcohol, tobacco or pornographies consumption reduction, or even unhealthy

food tax to reduce their externalities. In his book96, he gave the concrete example with building a factory

in the middle of the neighborhood.97 The externalities can be pollution, congestions, haze, or other health

issues. Thus interference to discourage the activity is fair and necessary.98 Tax is thus the tool that will

discourage excess consumption and raise public revenue to deal with externalities.99

These following graphs show how Pigouvian tax work.

95 Tejvan Pettinger (June 1,2018), Pigovian tax https://www.economicshelp.org/blog/glossary/pigovian-tax/ 96 A.C. Pigou, m.a. professor of political economy in the university of cambridge (1932), The economics of welfare, chapter 9 paragraph 1 P. 172 97 “In general industrialists are interested, not in the social, but only in the private, net product of their operations. They (externalities) are rendered, again, when the owner of a site in a residential quarter of a city builds a factory there and so destroys a great part of the amenities of the neighboring sites; or, in a less degree, when he uses his site in such a way as to spoil the lighting of the houses opposite …” 98 The economics of welfare chapter 12, p.531 99 The economics of welfare chapter 9 section13 p.193 “The private net product of any unit of investment is unduly large relatively to the social net product in the businesses of producing and distributing alcoholic drinks. Consequently, in nearly all countries, special taxes are placed upon these businesses.” Pigou

27

Figure.1 shows the externalities of building a factory and costs in the market. Tax will raise the price from

market price to efficient price as well as reduce the overuse quantity to the efficient quantity. A

deadweight loss would not occur. Here, when the factories are exploiting the resources, the negative

outcomes of their activities(externalities) are pollution, congestions, haze, and other health issues of the

residents in that neighborhood. When the price is too low, which here can be price for discharging toxic

substances, the consumption is going to exceed the efficient amount that maintain the market in the

efficient equilibrium. In order to fix the imbalance in the inefficient market (the market which has

deadweight loss or the negative cost that the public needs to bear), intervention of the price to change

the consumption is a must. After the price is intervened and put to an efficient level, the market condition

would be back to the efficient market. Excessive sugar consumption could also be a good example of social

cost. When the people consume sugar to the quantity which exceeds the efficient level, externalities such

as obesity and diseases which the obese individuals are prone to have. Obesity also cost the medical

service section to provide treatment and medication. Thus, there are sufficient justifications for the state

to intervene in the consumption and set the price up to decrease the demand of the consumers to the

efficient quantity.

Even if Pigouvian tax might sound idealistically nice in theory, however, making pigouvian tax optimal is

very challenging. The issue that makes pigouvian tax hard in practice is addressing the perfectly right

amount of tax to countervail the externalities.100 There are more factors involving besides the price of the

product. Those factors can affect the final tax rate and disrupt the effectiveness of offsetting external

costs.

100 Vinelli, Ryan, Sugar Taxes Aren’t Sweet: The Case against Taxes on Sugar-Based Drinks (May 26, 2009). SSRN: https://ssrn.com/abstract=1410068 or http://dx.doi.org/10.2139/ssrn.1410068

https://dx.doi.org/10.2139/ssrn.1410068

28

One of the classic papers by Ronald Coase, The problem of social cost addressed three downsides of

pigouvian tax as follows “the Pigovian “corrective tax” approach of dealing with externalities is flawed, in

that the corrective measure may itself produce further unintended consequences, noting that the

corrective measure “diverts attention from those other changes in the system which are inevitably

associated with the corrective measure, changes which may well produce more harm than the original

deficiency.”101 He explained the first downside by using the factory scenario of Pigou in his hypothetical.

Firstly, the externalities are more complicated than one side cause negative effects on the other side.

Sometimes, the business is located before the arrival of people; the solution thus shall be other methods

besides taxing the factory. Second, he suggests that negotiation between both sides can achieve optimal

allocation with the clearly defined property right. Optimal allocation can be achieved through market

without intervention of the government. Third, cost-benefit analysis between intervention and the

voluntary negotiation is still necessary; sometimes, intervention is less effective than voluntary

negotiation and cause more externalities when it is wrongly calculated.102 Nevertheless, even if Coase was

partly right, when it comes to the conflict between parties in the larger economics scale, bargaining is not

going to be practical as well as the zero cost of transaction. For instance, the externalities from food or

beverages consumption or global climate change which affect the people from the whole nation or multi-

nation are likely not to be possibly resolved by bargaining.

Jonathan s. Masur and Eric A. Posner also suggested five downsides of pigouvian tax which includes: (1)

administrative problem, (2) political interest (3) negative symbolism and ideology (4) interaction of

authority (5) risk adverse regulator.103 The first issue states that when the determination of social cost is

not precisely addressed, the result will be inaccurate, and the optimal number will not be achieved. When

marginal social cost is calculated uniformly, some exceptions would be overlooked and neglected.104

Sugar tax and fat tax were taken as examples. Many research and studies stated that obesity causes

externalities and should be internalized. Sugar or fat, which are believed to be the factors of externalities,

shall be taxed. However, some people who consume sugary or fatty food do not become obese. They

should not be taxed. It is better to differentiate and tax only the group who are prone to obesity.

101 Coarse, R. (1960). The problem of social cost. University of Virginia. 102 "Difference between Coasean and Pigouvian Solution to an environment problem." UKEssays.com. 11 2018. All Answers Ltd. 05 2019 <https://www.ukessays.com/essays/economics/difference-between-coasean-and-pigouvian-solution-to-an-environmental-problem-economics-essay.php?vref=1>. 103 Jonathan S. Masur; Eric A. Posner, Toward a Pigouvian State, 164 U. Pa. L. Rev. 93 (2015) 104 Professor Victor Fleischer, Curb Your Enthusiasm for Pigovian Taxes(2015)

29

Nevertheless, such tax would be difficult to be managed.105 The second issue is political interest. When

the regulation is likely to affect the interest of one-party group, such party would have incentive to lobby

for their interest. Such lobbyists could lead to the suboptimal tax. Third, negative symbolism refers to the

negative image of pigovian tax, which is perceived by individuals. Instead of the direct regulation

(command-and-control regulation), pigouvian tax still allows the producers to cause externalities so long

as they are willing to pay requisite tax to the government. Fourth, the authority of legislative and another

part of issuing tax could be overlapped and cause confusion. Last, the risk-aversion would cause the

regulators to follow the existing method rather than step into the new potential optimal level.106

The Failure of pigouvian tax system by Geert Thijssen107 also suggests the difference between the

producers who are various in efficiency, management, resources, or capability under regulations.

Generalizing the marginal costs of those firms is unsound and would make the tax inequivalent to the

offset of the externalities amount.

3.4 Optimally effective regulation and policy in theory

The policy which takes an endless amount of time while providing no beneficiaries at the end cannot be

considered as a good policy. Effectiveness is one of the most important parts of policymaking that makes

the ultimate goal of the policy achieved. Effectiveness of the regulation is defined in many different

definitions. Some of the principles of general regulation effectiveness and the assessment were

mentioned in Report-SC090028 of the Environment Agency108 concluded that the effectiveness could be

determined by a logical approach that shows the connection between intervention and the outcomes.

The logical approach is divided into two categories: 1) Assessing or measuring effectiveness, and 2) Factors

influencing effectiveness. The first one is explained that effectiveness is defined as whether the desired

outcomes are achieved. On the other hand, the latter uses intervention design as a tool to evaluate the

effectiveness of intervention regulation. The intervention design analyzes how much the message

between the regulator (messenger) and the regulated (recipient) fully understood and fit the purpose of

the message. It also analyzes the situation factors such as the nature of the behavior change that is

105 Jonathan S. Masur; Eric A. Posner, Toward a Pigouvian State, 164 U. Pa. L. Rev. 93 (2015) p.139 106 Jonathan S. Masur; Eric A. Posner, Toward a Pigouvian State, 164 U. Pa. L. Rev. 93 (2015) p.144 107 Geert Thijssen, the failure of pigovian tax system when inefficiencies are taken into account(1993) 108 Agency, E. (2011, September 26). Effectiveness of Regulation: Literature Review and Analysis, https://www.gov.uk/government/publications/effectiveness-of-regulation-literature-review-and-analysis

30

desired, the characteristics of the recipient of the relationship between the regulator and the recipient.

One effective intervention in one place might be not effective in another due to the differences of

attitude, perception, motivation, or capacity of both the regulator and the regulated in another place.

Another study from Mexico (Thomadakis, 2007) suggests that to determine the effectiveness of the

legislation, three answers must be answered- “First, is the regulation properly covered? Second, will the

regulation give rise to anomalies and inconsistencies? And third, can it and will it be properly complied

with and enforced?”

When it comes to tax policy, there are some other parts that need to be satisfied. One study109 from the

tax policy center suggests that the design of tax policy and the level of tax also can make a difference

between the outcomes. There can be many alternatives for reaching desired outcomes. All of them should

be addressed, and the regulator must consider all factors, compare, and select the most efficient method

or alternatives. For instance, when the regulator wants to reduce consumption of added sugar in soft

drink, there can be many alternatives to taxation. Rate, scope, and exemption in the context of tax policy

all can show significant effects. This study gave an example of the difference between the different ways

of rate settlement. The rate can be based on sugar content (per gram of sugar), the volume of the soft

drink or sales value (percent of the retail price).110 Sugar content tax shows the highest capability to

reduce consumption than other policies. This tax can increase the price of sweetened-drinks and reduce

the demand of consumers. When the alternatives are available and affordable, the consumers would likely

switch from the previous product to the substitutes. The business section would reformulate the

beverages to avoid the threshold amount or introduce the substitutes into the market for replacing the

loss from the previous products. This method thus makes consumers consuming lower amount of sugar.

The next policy that sets the tax based on sales value is less effective. This policy would increase the price

of the beverages while does not incentivize the businesses to reformulate or to introduce healthier

alternatives or the customer to switch to the lower sugar beverages. The consumer can get the less

reputable brand which cost less yet contains the same amount of sugar as the famous brand that costs

higher. The revenue would increase while the sugar consumption would not be lower. Without reducing

sugar consumption, the ultimate goal of reducing obesity would never be achieved. These methods can

also be made in the hybrid approach. Hungary exempts the beverage which contains less than 8 grams of

109 Donald Marron, M. G. (2015). Director of economic policy initiatives and Institute fellow at the Urban Institute. Washington DC. 110 Economic Perspectives: The Efficiency of a Tax System. https://econperspectives.blogspot.com/2008/12/efficiency-of-tax-system-overview. 19 May. 2019

31

sugar per 100 ml. The tax encourages consumers and businesses to favor lower-sugar drinks over higher-

sugar ones, but the tax does not differentiate sugar content within categories. Taxing on volume seems

like the worst among three since it ignores the nature of the beverages. At the same volume, beverages

can be varied in the amount of sugar. For instance, some tea might contain about 6 g of sugar per 100 ml

while other beverages could have 20-30 g of sugar per 100 ml.would not change the sugar consumption

behaviors thus end up as the previous policy. This policy is unfair for the manufacturers who reduce the

amount of sugar in their beverage, yet their products are taxed in equivalent to the other high sugar

products. The consumption of sugar could either not change or increase, which is opposite to the goal of

sugar tax. This study thus concludes that the most effective policy is the one that works toward the

ultimate goal with least amount of downsides.

However, these outcomes can be different among jurisdictions which have different social structure or

economic conditions. Another study suggests that not only the effectiveness of the regulation should be

considered but also the economic efficiency. Economic efficiency refers to the costs it imposes on

taxpayers (Buck, 2008). There are two costs of taxes besides the monetary payments from taxpayers to

the government which are the cost of altering incentives and behaviors and cost in the administrative

burden of complying with the tax laws which can be the loss for compliance or other negative costs. If

these costs are managed to be relatively low, then the tax system is efficient.111 If these two costs are

relatively high, then the tax system is inefficient. Inefficient taxes cause an inefficient allocation of

economic resources and thus are generally considered to be less desirable than efficient taxes. In sum, in

order to indicate the effectiveness of the regulation or tax policy, the desired outcomes must be achieved

at the lowest cost of compliance while having the least number of downsides.

3.5 Excise tax Approach

According to the taxation principle112, the good excise tax policy should include (1) simplicity (2)

equitability and (3) appropriateness. The first component means the tax should be clearly described,

defined, and classified as much as it is possible. It is better to avoid adding unnecessary complexities when

designing the policy. In the case of tax on sugary beverages, there should be a clear classification of the

111 Should We Tax Unhealthy Foods And Drinks? December 2015." . 19 May. 2019 https://studylib.net/doc/14264471/should-we-tax-unhealthy-foods-and-drinkspercent3F-de. 112 Asia-pacific Tax Forum, ASEAN Excise Tax Reform: A Resource Manual

32

beverages in order to make a clear understanding of the manufacturers. The next component refers to

non-discriminatory practice in tax imposition. The excise tax shall not favor or discriminate against one

type of beverage over another. It thus shall be covered all potential sources which cause externalities.

Here, since obesity is externality, all potential factors including high calories beverages which can be fat,

or carbohydrates shall be covered also. Not only beverages but also food can cause obesity when the total

calorie intake exceeds the daily calories need. These foods thus should not be exempted regarding the

equitability of excise tax principles. However, there can be some exemption granted to the products which

show no obesity or health issues such as water, stevia-sweetened products, or other non-harmful artificial

sweeteners. Discriminatory treatment within the same industry would be unfair under equitability and

infringes competition law issues. The regulator thus needs to consider all relevant causes of externalities

and impose the tax on the extensive scale rather than focusing on one certain group in order to maximize

the effectiveness of the policy in counterbalancing externalities. The last component of a good excise tax

is appropriateness means the government or the regulator should set the rate appropriately regarding

the characteristic of the products. The rates are an important indicator of the outcome, thus require

deliberate consideration. However, there is no one size fit all amount or rate, which can be applied in

every country. Each country would have the best rate for itself regarding the government system

(capitalist or socialist), income per capita, purchase power, tax, living cost, as well as the mindset of

people. In order to make the good excise tax. Revenue, cost of externalities, market impacts, minimal

regressivity, practicability as well as other miscellaneous issues should be deeply analyzed before

launching the policy for the most efficient tax.

3.6 Price Elasticity of Demand (PED)

Price elasticity of demand is the part that must not be overlooked due to its importance for setting the

tax rate. Price elasticity of demand is an economic instrument that demonstrates the sensitivity of

quantity demanded or the purchase in the different changes in the price of the product.113 PED can predict

consumer behaviors after the price change.114 It can be calculated by taking the percent of change in

113 Will Kenton, Price elastic of demand (November 2018) https://www.investopedia.com/terms/p/priceelasticity.asp 114 Gillespie, Andrew (1 March 2007). Foundations of Economics. Oxford University Press. ISBN 978-0-19-929637-8.

33

quantity demand divided by the percent of change in price (𝑃𝐸𝐷 =𝑝𝑒𝑟𝑐𝑒𝑛𝑡∆ 𝑖𝑛 𝑄𝑑

𝑝𝑒𝑟𝑐𝑒𝑛𝑡∆𝑖𝑛 𝑃).115 The larger number

we get from the calculation, the more price elastic the product is. When the price elasticity is higher, the

more demand sensitivity of such products will be higher. PED numbers can be categorized into 5 types.116

1. Perfect Inelastic of demand (PED=0) When there is inelastic demand, there will be no change when the

price increase. This type is almost impossible but can be in some circumstances. When the tap water is

not potable, people’s demand for the bottled water will be constant regardless of the price.

2. Relative Inelastic Demand (PED= -1<X<0). This type occurs when the percent decrease in demand is

lower than the increment of the price.

3. Unit elastic Demand (PED= -1). This type occurs when the decrease in percent of demand is equivalent

to the decrease in percent of the change in price.

4. Relative elastic Demand (PED=-∞<x<-1). In this case, when the percent of price change, the percent of

demand falls more than the increment.

5. Perfect elastic Demand (PED=-∞). This last case means when there is an increment of the price, the

demand becomes 0.

115 Id. 116 Prateek agarwal, Intelligent economist, price elastic of demand (April 2019) https://www.intelligenteconomist.com/price-elasticity-of-demand/

34

Figure 3.117 Show how the price elasticity of demand moves

PED varies among products and always fluctuate depending on factors such as alternatives or economic

situation. In some product such as gasoline, even if the price increase, the demand is likely not going to

be decreased. Conversely, when the price of coffee increases too much, people will swap to other

interchangeable products such as tea. The shown amount in the short run and long run could be

significantly different at a different time. The determinants that affect demand elasticity could be:

1. Availability of substitutable goods118

Among factors that determine the elasticity of demand, the availability of substitutes is the most

important. If the substitute goods are available, the demand would be shifted to other alternatives when

the price goes up. For instance, when one brand’s smartphone price goes up, the people can switch to

other brands that offer similar products in the market. On the other hand, when there are not many

substitutable products, people would have no other options besides bear the cost and use it even if the

price insanely surge up.

2. percentage of incomes119

Another important indicator of the elasticity of demand is the proportion between the price of those

products and the income of the consumers.120 In other words, when the price of the product is

insignificantly increased, the consumers would likely not be as sensitive as the increment of expensive

products such as cars or brand name products. The greater the ratio between income and the price, the

more elastic of demand would be.

3. Necessity121

Necessity is one of the major factors that affect the elasticity of demand. Necessity can be roughly divided

into three levels, which are 1)essential, 2)comfort, and 3) luxury. The essential goods would have the

elasticity of demand lower than the other luxurious goods. For instance, when the price of salt goes up,

the demand is likely to be less elastic than when the price of Tesla goes up.

117 Id. 118 Goodwin; Nelson; Ackerman; Weisskopf (2009). Microeconomics in Context (2nd ed.) 119 Frank, Robert (2008). Microeconomics and Behavior (7th Ed.). McGraw-Hill. P.119 120 Determinants of Price Elasticity of Demand | Goods - Economics." http://www.economicsdiscussion.net/price-elasticity-of-demand/determinants-of-pr. 19 May. 2019 121 Smirti Chand, 5 factors which determine the price elasticity of demand http://www.yourarticlelibrary.com/economics/elasticity-as-demand/5-factors-which-determine-the-price-elasticity-of-demand/39062

35

4. Time to find a new alternative122

For most goods, when the price is extensively stable, the more sensitive elastic of demand would be. The

consumers who have time to find the different alternatives tend to be more elastic to the change of the

price. For instance, if the price of gasoline increase to the unaffordable level overnight, the demand would

not be elastic since the time limit makes substitution impractical. However, when the technology

advancement gives the new alternative of fuels while the price of oil slowly goes up, the consumer would

have a chance to switch to the other alternatives.

5. Brand loyalty/personal preferences

This factor can be quite difficult to explain with rules or reasons. When it comes to personal preference,

there will not be any great elasticity of demand, even in the massive increment of the price. People who

have brand loyalty would always stick to the same brand regardless the price.123

6. Complimentarily between products124

Sometimes the elasticity of one product would affect the elasticity of demand on another product. For

instance, when the price of oil increases, the demand for automobiles would likely to be elastic.

Studies show the general PED of soft drink products in the market in a different way yet very close in the

result. A study by Brownell125 shows PED of the soft drink, in general, is around -0.8 to -1.0. That means

that soft drink price is relatively inelastic. Another study from the University of Amsterdam126 shows

different PED of soft drinks in the Netherlands to be -1.43, which means when the price increase by

10percent, the demand would be decreased at 14.3percent. Some region is likely to be less sensitive to

the change of price. Other statistics show that PED of soft drink range from -0.13- -3.18. It is also

interesting that PED also varies among the brand. For instance, PED of coke is -3.8 while sprite is only -

2.18. Few studies concluded that the youth are less sensitive to the price than other age.127 PED of soft

drink in Thailand was calculated in one study of Rob128 in 2008 at approximately -1.2to -1.3.129 If this range

122 Parkin, Michael; Powell, Melanie; Matthews, Kent (2002). Economics. Harlow: Addison-Wesley p.77-79 123 Png, Ivan (1999). Managerial Economics. Blackwell. ISBN 978-0-631-22516-4. P.62 124 Smirti Chand, 5 factors which determine the price elasticity of demand http://www.yourarticlelibrary.com/economics/elasticity-as-demand/5-factors-which-determine-the-price-elasticity-of-demand/39062 125 Brownell, Kelly D.; Farley, Thomas; Willett, Walter C.; Popkin, Barry M.; Chaloupka, Frank J.; Thompson, Joseph W.; Ludwig, David S. (15 October 2009). "The Public Health and Economic Benefits of Taxing Sugar-Sweetened Beverages". New England Journal of Medicine. 361 (16): 1599–1605. doi:10.1056/NEJMhpr0905723 126 Abel Grünfeld, Price elasticity of demand for soft drinks in the Netherlands (June2017) 127 Kelly D. Brownell, Mark S. Gold(2012), Food and Addiction: A Comprehensive Handbook(2012) ISBN:9780199908219 p.371 128 Rob Preece, World custom journal, Excise taxation of non-alcoholic beverages in Thailand: products, approaches, rates and administration(September 2012) 129 Id.

36

is still valid, after the introduction of the sugar tax, the demand will decrease by 12-13percent for

10percent of the increment of the price.

3.6 Previous failure of Interventions

As presented that the tax can function as a behavior control mechanism, the next issue is whether theses

Pigouvian taxes work effectively under the theory in practice. The government has attempted changing

the behaviors of the society through tax policy, but are they effective? Due to the similarities of intention

and externalities between sugar tax and alcohol and tobacco taxes, studies about the effectiveness of

those taxed are chosen here for comparison.

3.6.1 Alcohol

Pigouvian tax was imposed on the behavior consumption which the policymakers see as “bad” and use it

to offset social cost deriving from such consumption. Alcohol was countlessly accused of its negative

externalities, including violence, crime, road accidents, work capabilities, and increased healthcare costs.

Different levels of tax are imposed toward alcohol. For instance, statistics for Disease Control and

Prevention (CDC) show that excessive drinking cause around 88,000 deaths in the US every year which is

higher than other causes of death that get more attention such as gun, HIV or terrorisms.130 Studies show

the change between consumption and price inversely, yet the reduction alone could not make ultimate

goal achieved. Study of Sousa131 analyzes PED among alcohol beverages including beers, spirits, RTDs,

ciders, and wine show that the estimated elasticity of demand of all alcoholic drinks are inelastic with the

exception of on-trade spirits which PED is about -1.25. Therefore, it can be concluded that the change in

the price is likely not to affect the demand for alcohol significantly. A similar study from Jon P Nelson132

was made by analyzing 112 primary studies for beer elasticities, 104 studies for wine, 111 studies for

distilled spirits, and 66 studies for total alcohol demand. The result shows that “For individual beverages,

corrected price elasticities are smaller (less elastic) by 28-29 percent compared with consensus averages

frequently used for alcoholic beverages. The average price and income elasticities for beer are, -0.30 and

0.50; wine, -0.45 and 1.00; and spirits, -0.55 and 1.00, respectively. For total alcohol, the price elasticity is

130 German Lopez (December 2018), The case for raising the alcohol tax https://www.vox.com/future-perfect/2018/12/13/18130843/alcohol-taxes 131 Sousa, J., (2014, December). Estimation of price elasticities of demand for alcohol in the UK. UK: HM revenues& customs. 132 Nelson JP. Meta-analysis of alcohol price and income elasticities - with corrections for publication bias. Health Econ Rev. 2013;3(1):17. Published 2013 Jul 24. doi:10.1186/2191-1991-3-17

37

-0.50, and the income elasticity is 0.60.” The conclusion was also made that the attempt of reducing

alcohol consumption through price or tax increase will be less effective or more costly than previously

claimed in 1975-2005.133 In Denmark, study of effect of lower tax on alcohol reduction by Ulrike Gritner134

and team from 2003 to 2006 also concluded that alcohol consumption stays relatively stable. Thus, price

might not be significant in the inelastic goods. Statistics also show that the revenue from taxation is 9.23

billion USD. However, the externalities cost of alcohol consumption is about 249 billion USD. These facts

show that externalities of consumption cannot be deterred by tax solely. According to statistics by WHO

in 2010135, the amount of pure alcohol consumption in Thailand increased from 6.1 to 6.4 liters a year and

consistently increased. Since the heavy tax imposition on alcoholic beverages in 1984, the consumption

of alcohol in Thailand still increased.136

3.6.2 Tobacco

Pearl Bader137 reviewed and extracted data from studies about price and the use of tobacco. There are

108 studies in the study which involves seven categories of people, including youth, young adults, Low

social, economic status, mental illness, heavy smokers, and aboriginal people. There was strong evidence

that raising cigarette prices through increased taxes is a more effective tobacco control policy measure

for reducing smoking behavior among youth, young adults, and persons of low socioeconomic status,

compared to the general population. In contrast, there was insufficient evidence about the impact of

price on smoking behavior in persons with a mental illness, heavy smokers, and Aboriginal people.

Bird138 researched the impact of tax on tobacco consumption and concluded that the most effective

regulation must have been made with the calculation of the rate needed to internalize the net social costs

of externalities associated with consumption. Such calculations require not only the data available but

also the plausibility of the many assumptions on which they are necessarily based. In practice, the

133 Borenstein M, Hedges L, Higgins J, Rothstein H. Comprehensive Meta-Analysis, version 2.0. Englewood, NJ: Biostat, Inc.; 2008. 134 Grittner U, Gustafsson NK, Bloomfield K. Changes in alcohol consumption in Denmark after the tax reduction on spirits. Eur Addict Res. 2009;15(4):216–223. doi:10.1159/000239415 135 https://www.who.int/substance_abuse/publications/global_alcohol_report/profiles/tha.pdf 136 Sawitri Assanangkornchai, Nisan Sam-Angsri, Sirinporn Rerngpongpan, Amata Lertnakorn, Patterns of Alcohol Consumption in the Thai Population: Results of the National Household Survey of 2007, Alcohol and Alcoholism, Volume 45, Issue 3, May-June 2010, Pages 278–285, https://doi.org/10.1093/alcalc/agq018 137 Pearl Bader, d. b. (2011). Effects of Tobacco Taxation and Pricing on Smoking Behavior in High-Risk Populations: A Knowledge Synthesis. MDPI. 138 Bird, Richard Miller, Tobacco and Alcohol Excise Taxes for Improving Public Health and Revenue Outcomes: Marrying Sin and Virtue? (November 23, 2015). World Bank Policy Research Working Paper No. 7500. SSRN: https://ssrn.com/abstract=2695230

https://ssrn.com/abstract=2695230

38

assumption could be inaccurate and create the ineffectiveness of the regulation. Therefore, it is almost

impossible to make the ideally optimal regulation in practice. Other studies also concluded that tax is not

the best instrument in controlling consumption behavior. It has shown many failures in the past, either

on alcohol beverages or cigarettes.

Taxes either excise tax139 or alcohol business tax 140 , as well as fine penalties(5000 THB/162.79 USD), have

been used as a tool to reduce the negative cost. The Excise Department earned 29143 million THB in 2006

and 61953 Million THB in 2016 from alcohol drinks and tobacco.141 Nevertheless, the consumption rate of

alcohol does not move in a positive direction. On the other hand, in the case of cigarette, there is a

significant decrease in the number of the smoker which decreases from 46.6 to 35.8 percent in male and

from 3.1 to 1.8 percent in the female.142 143

There is a heavy burden of tax on the manufacturers, importers or retail sellers and result in a higher price

for the products. However, the potential causes of the decrement of consumption are the very restricted

law that prohibits smoking in the public area with more than 80 types of buildings and venues as well as

the fine penalty144 rather than the excise tax alone.145 The social judgment also plays a big role. Smoking

is perceived as something unpleasant or even disgusting in some cases. The women who smoke

sometimes are perceived as hookers. Education in school about second-hand smoke made the public

negatively react toward smoking. The media also portrays the reaction of society to the smokers. While

drinking is still acceptable as socializing purposes, smoking is not perceived the same as drinking. Excise

tax can partly control the reduction, yet the other factors also play significant role in successfulness.

139 Beer,wine,spirits 140 Earmarked tax 15.5percent for public interest activities. 141 Thai publica, where does the revenue from alcohol and tobacco go to? https://thaipublica.org/2017/09/sin-tax-who-is-the-big-one/ 142 https://www.indexmundi.com/facts/thailand/smoking-prevalence 143 https://tobaccoatlas.org/country/thailand/ 144 5000 THB for the minimum wage at 300 THB per day is extremely high 145 types of buildings and venues are covered under the new smoking law which includes: airports, amusement, parks and water parks, banks/cash machines/ATMs, cinemas and other entertainment venues, condos, apartments & rental buildings, fitness parks and gyms, government offices ,hospitals and clinics, hotels, grocery stores, Libraries, laundries, massage and spa venues, public parking areas, pubs, religious buildings, restaurants, schools and nurseries, shopping malls, swimming pools, toilets (public toilets),various transportation areas including bus stops, piers and taxi/mini-van stands

39

CHAPTER 4: ANALYSIS OF THE REGULATION AND THEIR EFFECTIVENESS

4.1 REGULATORY FRAMEWORKS WORLDWIDE

Under this part, this thesis will analyze the sugar tax from pioneer jurisdictions and the successful

jurisdiction. It would start addressing the definition of the sugar under the regulation and which one that

they cover, the rate of sugar tax, and their effectiveness in statistics.

Before the implementation of a sugar tax in many jurisdictions, several studies have shown many impact

predictions in different numbers yet in the same direction of outcome . The studies which predict the

positive outcomes are: one circulation from Yale146 by Novak suggested that the reduction of obesity will

require policy changes that improve the food and physical activity defaults for all Americans not only

specific individuals. Incentives for healthy food must be made. Fiscal interventions like taxes can be an

excellently strong method of improving the food environment. It blames that those unhealthy beverages

contain over 10percent of caloric intake while giving almost no nutritional benefits. It predicted the price

to be increased by 20percent and will reduce the consumption around 14-20percent. The higher

consumption of healthier alternative was also predicted. However, political factors such as lobbying might

make it hard to achieve at that level. Another prediction from the UK,147 also predicts in the same

direction. It uses four sources including Canadean (volume per type of soft drink and price per drink per

distribution channel), Kantar world panel (sugar content per drink), agricultural and horticulture dairy

board and the previous Oxford economics research for the BSDA. It predicted that the levy would impact

the price, consumption patterns, sale volume, and the revenue prediction in the reduction direction.

After a few predictions of the impacts, there are a reasonable amount of studies that were made regarding

the actual impacts of Sugar tax. One study was made in France by Berardi148 analyzed the impact the

imposition of tax in August 2011- June 2012 by comparing the pass-through of price impacts. This study

divided beverages into three categories, including water, juice, and soda, with 845 products in 804 shops.

146 Novak, N. L. (2012, November 6). Role of Policy and Government in the Obesity Epidemic. The Rudd Center for Food Policy and Obesity, p. 2345. 147 Oxford economics (2016), the economics of soft drinks levy. 148 Berardi, Nicoletta and Sevestre, Patrick and Tepaut, Marine and Vigneron, Alexandre, The Impact of a 'Soda Tax' on Prices: Evidence from French Micro Data (December 2012). Banque de France Working Paper No. 415. SSRN: https://ssrn.com/abstract=2192470 or http://dx.doi.org/10.2139/ssrn.2192470



40

The result showed that the tax had been fully shifted to prices of sodas. Another study by Stephan Seiler149

outlined the impacts of sugar tax in Philadelphia, which is 1.5 cents per oz. The information was gathered

from January 2015 to September 2018 and contains information about price and quantity sold at

UPC/store/week level. The products which are chosen are either taxed or untaxed products, which

constitutes substitution. The results are shown in different aspects includes price reaction and pass-

through, Quantity reaction, pricing, and demand for untaxed beverages and heterogeneity across pack

sizes and categories.

The price reaction pass through (cents/oz.) showed that the pass-through was 1.45 cents per oz, which is

97percent of the coefficient amount. The overall price increased by 4.26 cents, this pass-through rate

constituted 34percent increment of price. The pass-through is similar across chains. The quantitative

reaction shows an average decrease of 56,000 ounces per store in the total volume of taxed beverages

that were sold in Philadelphia. This effect is large in magnitude and constitutes a 46percent reduction

relative to the average pre-tax level of weekly sales of 122,000 ounces per store. However, the sale of the

small store and in drug stores decreased or no decreased at all. Pricing and demand for untaxed beverages

increased by 9percent in natural juice while the water insignificantly changed. Cross-shopping occurred

and caused the calories consumption remained the same. Study of UC Berkley150 shows that the

consumption of sugary beverage went down by over 50 percent since the implementation of the tax in

2014. Water consumption went up by 29 percent. The reduction is also found in Mexico by 21percent

after 1 year. Similarly (Ortún, 2016), concluded that the effects are amplified even in the medium term,

once established new habits to healthier eating. These studies have to provide insight into how sugar tax

impacts economics.

On the other hand, the numbers of researches show the result in the opposite direction. One research,

“sugar taxes aren’t sweet” (Vinelli, 2009) concluded that sugar taxes would fail for four reasons. First, the

reduction of sugar consumption from sweet beverages do not equal to the obesity reduction. Sugar in the

beverages is not the only source that the consumers get an excessive amount of sugar. Second, the scope

of tax so far proposed is insufficient with regards to slowing or abating obesity. Narrowly imposition would

149 Seiler, Stephan and Tuchman, Anna and Yao, Song, The Impact of Soda Taxes: Pass-Through, Tax Avoidance, and Nutritional Effects (May 1, 2019). Stanford University Graduate School of Business Research Paper No. 19-12. SSRN: https://ssrn.com/abstract=3302335 or http://dx.doi.org/10.2139/ssrn.3302335 150 University of California - Berkeley. "Three years into soda tax, sugary drink consumption down more than 50 percent in Berkeley: Taxes may be a promising new tool in the fight again obesity, cardiovascular disease and diabetes." ScienceDaily. www.sciencedaily.com/releases/2019/02/190221172056.htm (accessed May 11, 2019)



41

leave some spaces for the consumers to swap to other tax-free high sugar alternatives. Third, the amount

of tax needs to be high enough to induce lower consumption significantly. Even if it changes behaviors of

consumers, the next problem is the revenue would grow slower and result in the insufficient amount to

offset the health cost. Since obesity accumulates in a long period, the cost of reduction shall not be

temporary. When the revenue was decreased too low, there will not be the revenue for obesity

medication. Last, without subsidies, the tax would be highly regressive. When posing the difficulty of

affording the previous product, access to healthy options should be facilitated. This tax could target low-

income whose life relies on the taxed products and cannot afford healthy food. According to those three

reasons, a sugar tax is likely to be ineffective and fail at the end. Another study by Donald Marron151

concluded that even the most well-designed tax would always pose some regressive effects to the low

income. Unlike smoking, eating a moderate amount of sugar is consistent with good health.

These studies propose only the short-term impacts of sugar taxes. One limitation of past studies is the

lack of consistency of progress tracking in one country. To the best of my knowledge, there are no recent

studies have been conducted in the same countries. For instance, Hungary, where the tax existed since

2011, there should be research that follows up with the successfulness after eight years of the policy.

Obesity does not accumulate overnight, therefore, the reduction would also not be overnight. The long

term effect cannot be concluded without extensive information yearly. The reduction of consumption

might be from other factors such as economics or health trend reasons and occur temporarily only. Future

studies could, for instance, be consistently made in the area which the implantation has been conducted

for at least over three years. Such research could address the significance in the change of obesity growth

rate, job losses, the different responses in the different rates of tax, and the consumption per capita.

Study of Jason and Walter152 prove that Since the consumption of juice increase in the jurisdictions where

juices which contain high sugar, the obesity rate will not be different from the scenario that people drink

soft drinks. The reduction of sugar can partly help in a weight loss of populations because weight loss

occurs when caloric intake is lower than daily need. At least cutting sugar in the beverages is still a decent

strategy to reduce overall daily caloric intake. Other desserts or even coffee such as Starbucks coffees can

151 Donald Marron, M. G. (2015). Director of economic policy initiatives and Institute fellow at the Urban Institute. Washington DC. 152 Block, J. P., & Willett, W. C. (2013). Taxing sugar-sweetened beverages: not a "holy grail" but a cup at least half comment on "food taxes: a new holy grail? International journal of health policy and management, 1(2), 183–185. doi:10.15171/ijhpm.2013.33

42

also give an unnecessary amount of sugar. When the regulation does not address them, obesity can still

have some safe zone to grow. A study from Finland153 also shows the interesting impacts on obesity when

sugar tax was enforced. The average reduction of body weight is about 3.2 kg. The reduction was found

more dominantly in the lower-income individuals and more in females and males. A study from Australia

shows that after the implementation of tax, the consumption of added sugar declined by 18percent in

males while in the woman, there is no noticeable change. The proportion of energy from sugar-sweetened

beverages declined by 10percent in males and 20percent by female while studies in Europe and Mexico

resulted in the opposite directions. In order to meet the goal, besides the behaviors of consumers are

expected to change, the manufacturers are also expected to change their production to cause less

negative externalities. That means when tax policy is imposed against sugar in the beverages, beverages

should change toward the direction which consists of lower sugar in the products. Substitution or

reformulated products are expected to be made — studies from worldwide show reformulation of the

manufacturers.

As the effectiveness of regulation theory suggested, the keys are the design of the tax and whether the

desired outcomes are achieved. Here, the desired outcomes are a reduction of the consumption and

obesity growth stumbling. This chapter aims to answer the second thesis question by analyzing and

evaluating the effectiveness of regulatory by the content of the tax with two evaluation keys include

market impacts and obesity growth reduction and compared them to the previous studies. Firstly, the

legal content part would explain the origin of the idea of sugar tax in that country, then explains the

definition of sugar under each jurisdiction, scope of law and tax rates for those products as well as the

revenue from putting the tax.

In the market impacts part, this chapter will demonstrate the average revenue of manufacturers, volume

of sale, consumption per capita, price per unit, job loss consequences, the reformulation of products and

other potential cause which make market impact result in such way and the obesity growth is going to

discuss the change of obesity growth rate whether it decreases or increases or stay unchanged. After this

part, the last part of this chapter would analyze and summarize the difference between those jurisdictions

and Thailand. The reasons which make these 3 jurisdictions be chosen herein are (1) the sufficient amount

153 Kotakorpi, Kaisa and Härkänen, Tommi and Pietinen, Pirjo and Reinivuo, Heli and Suoniemi, Ilpo and Pirttila, Jukka, The Welfare Effects of Health-Based Food Tax Policy (November 14, 2011). CESifo Working Paper Series No. 3633. SSRN: https://ssrn.com/abstract=1959273

43

of time to see the difference. In order to see the reduction of obesity, there must be a reasonably long

period to see the result. Hungary has already passed such regulation since 2011 while Mexico began 3

years after. Both pioneer jurisdictions have sufficient time to see the difference in 5 years period or more.

The effectiveness thus can be seen more than the newcomer jurisdictions, (2) Norway is the newcomer

jurisdiction whose market impacts change in the desired goal direction in a very promising way thus worth

discussing how the reduction could occur in such short period. (3) The scope of these jurisdictions are

different, and these could show the difference among different broadness of the scope.

4.1.1 Mexico

In Mexico, the indirect taxes under Ley del Impuesto al Valor Agregado154 are applied to the products are

IVA (impuesto al valor agregado) which is equivalent to VAT155 and other special tax depending on

products and services, “IEPS”( impuestos especial sobre producción y Servicios ).156 The sugar tax was

firstly imposed in 2014 to any beverages with added powder, syrup, flavor extract, sugar or caloric

sweeteners. Carbonated drinks, energy drinks, bottled tea and coffee, fruit juice and any fruit-flavored

drink with added-sugar were all taxed at the rate of one Mexican peso (about 0.053 USD) per liter which

is about 9 percent of most products’price.157 Mexico attacked obesity with a single rate for any amount

of sugar and cover only added-sweeteners (a tax by volume). Artificial sugar added sodas even consist no

calories are not exempted. Pure juice, water drinks, milk, or other flavors of milk were exempted.158 Thus

the sale of these alternatives can be used as the key to the change of consumption behaviors. There is no

sign of revisions on the rate or scope since the effect has been shown. It also applied an 8 percent tax on

high sugar or high-fat food.

These following activities include supplies of goods, provision of independent services, imports of goods

or services and temporary use or enjoyment of goods (leasing) are subject to sugar tax if it is carried out

in the Mexican territory.

154 The legislation of excise tax 155 IVA is 16 percent general rate and 0 percent for exports of goods and service such as food (with some exceptions) and patent medicines books, newspapers, and magazines products, for the development of the primary sector gold with the content of 80 percent 156 KPMG, Ley del Impuesto al Valor Agregado, https://home.kpmg/xx/en/home/insights/2018/10/mexico-indirect-tax-guide.html 157 What the world can learn from Mexico’s tax on sugar-sweetened drinks http://theconversation.com/what-the-world-can-learn-from-mexicos-tax-on-sugar-sweetened-drinks-56696 158 Jeffrey Grogger, Soda Taxes and the Prices of Sodas and Other Drinks: Evidence from Mexico (2016)

http://theconversation.com/what-the-world-can-learn-from-mexicos-tax-on-sugar-sweetened-drinks-56696

http://theconversation.com/what-the-world-can-learn-from-mexicos-tax-on-sugar-sweetened-drinks-56696

44

a) Market impact

BMJ study159 shows that a 9percent tax on sugar-sweetened drinks has been shown the evidence overall

12percent reduction in sales and a 4percent increase in purchases of untaxed beverages one year after

implementation “Purchases of taxed beverages decreased by an average of 6percent in 2014 compared

with expected purchases without the tax.”160 Furthermore, these reductions became larger over time,

reaching a 12percent decline by December 2014. In other words, during 2014, the average urban Mexican

purchased 4.2 fewer liters of taxed beverages than expected without the tax. In contrast, purchases of

untaxed beverages were 4percent higher than expected without the tax, mainly driven by an increase in

purchases of bottled plain water.” claimed by BMJ study.

In 2015, the volume per capita decreased from 163 liters to 137 liters per capita. The study of M.A.

Colchero161 was made from sales data from the Monthly Surveys of the Manufacturing Industry from

January 2007 to December 2015. It claims that the sale of sugar-sweetened beverage per capita decreased

by 7.3percent and 5.2percent per capita sale increased by 5.2percent after the tax compared to pre-tax

period. These can be evidence of the successfulness of the first step to reducing obesity. The reason

behind this miracle could be the proportion of the soft drink price and the minimum wage. When the ratio

between the goods and living cost is higher, the more price elastic of demand is likely to be. The minimum

wage in Mexico at the time the sugar tax was introduced was 63.77-67.29 MXN (4.91-5.18 USD) a day162

, and the average household income is 13,239 MXN(843 USD) monthly which can be converted to be about

28 USD a day. In 2013 the average liter price of soda was about 11.4 pesos, or 0.62 USD at the current

rate. The soda price was 16-17.8 percent of daily minimum wage before the implementation of the sugar

tax. After the implementation, the tax supposed to add up about 9 percent of the average pre-tax price

of soda, yet the price was increased by 12percent.163 As a result, the price went up to be 13.26 peso per

liter of soda, which is 19-21.4 percent of the daily minimum wage. This significant increment triggered the

reduction in consumption of the people. Currently, the price of soda is about 25 MXN per liter164 (1.3

159 The BMJ press release, https://www.bmj.com/company/wp-content/uploads/2014/07/sugar-tax-mexico.pdf 160 Id. 161 M.A. Colchero, Beverages Sales in Mexico before and after Implementation of a Sugar Sweetened Beverage Tax (2016) 162 https://www.littler.com/mexico-approves-increase-minimum-wage-2014-geographic-zones-and-b 163 Hon Jonathan Colemen, Mexican sugar tax- evidence of impact (2015) Health report no.20151086 164 Riviera Maya online grocery, http://www.rivieramayagroceries.com/product-category/water-and-beverages/

https://www.bmj.com/company/wp-content/uploads/2014/07/sugar-tax-mexico.pdf

45

USD), and the minimum wage is 88.36 MXN per day165 thus currently the soft drink costs 28 percent of

the daily minimum wage.

While the revenue in 2014 was raised about 18,255 million MXN (925 million USD) and in 2015, 21,393

million MXN (1124 million USD), there was a significant job loss after the tax. According to ANPRAC, 7,100

job losses from the industry’s value chain happened after one year of the new soft drink tax.166 Industry

section also states that the reduction of sugar drinks occurred in the poorer people communities.167 The

contribution of the poor is about 67.3percent of the tax collected.168 Nowadays, about 50percent of the

product introduced lower or no calories products into the market. The caloric content of the products has

become lower by 7 percent averagely. The reformulation was in concern of the majority of producers.

The other issue was the allocation of revenue. In 2015, the Mexican Congress approved the annual budget

of 886 million pesos for preventing and controlling obesity in the population and promoting a healthier

lifestyle which represents only 3 percent of the revenue that was generated from this tax.

b) Obesity growth rates

A study by the Mexico Autonomous Institute of Technology (ITAM) found that there was no change in BMI

in 2014. The data was collected from the Mexican chapter of the Kantar World Panel (KWP). “The data

are collected from a weekly panel of more than 8000 households’ regarding purchases for household

consumption at the barcode level, specifying quantities and prices paid in each transaction for 46,000

barcodes along with self-reported information on the weight and height of the household head.” About

44 percent of survey participants are overweight, and 22 percent are obese. It concluded that there is no

evidence that proves the noteworthy change in the obesity of the participants. United Nations

organization for food and agricultural also states that obesity in Mexico from 2012-2016 increased by 3.8

million people (Vanguardia, 2018). Research from Instituto Nacional de Estadística y Geografía (INEGI)

also shows that the daily calorie consumption is still 3072 calories after the tax implementation.169 Indeed,

the consumption of sugar from beverages is reduced by 6 calories from the tax, yet caloric intake from

sugar drinks represents only 5-5.5percent of daily caloric intake. Therefore, the reduction of a minuscule

165 Mexico to Increase Minimum Wage for 2019 https://www.hklaw.com/publications/Mexico-to-Increase-Minimum-Wage-for-2019-12-20-2018/ 166http://anprac.org.mx/huella-economica/ 167 https://www.ameribev.org/files/resources/effects-of-the-mexican-soda-tax.pdf 168 KANTAR World Panel, January-December 2014 169 https://www.fooddrinktax.eu/wp-content/uploads/2018/07/IEPS_Why-the-STPS-to-soft-drinks-is-a-bad-idea_-1.pdf

46

fraction of the caloric intake will not change obesity.170 The study of Arturo Aguilar171 also shows that the

consumer moves to lower-priced products or those with similar calorie content. It can be concluded here

that sugar tax in Mexico was successful in raising revenue and reduce the consumption of sugar yet fail to

control obesity.

4.1.2 Norway

Norway has taxed refined sugar products since 1922 but for raising the revenue of the state rather than

reducing sugar consumption. The purpose changed to the reduction of sugar consumption in 2017, in

which the first-rate was set to 3.34 kroner per liter of beverage. The tax has been renewed in 2018 and

2019. The products which are subjected to this tax are the products which are manufactured in Norway

or imported into Norway. The “sugar” refers to Granulated sugar, Icing sugar, Rock candy, Refined, Pearl

sugar, syrup and sugar solutions in foods or beverages.172

No tax is payable on glucose (grape sugar), invert sugar, molasses, lactose, artificial honey, caramel, sugar

coloring, honey, diabetic sugar, 100 percent maple syrup or fondant powder not extracted from beet or

cane sugar plants.173 Thus water, diet drinks, fresh juice, and milk are the substitutes products for

consumers. “If sugar is used as an ingredient in another product, that product will be exempt from the

tax.”174Currently, the sugar tax is 8.05 NK per kg of taxable weight.175 The non-alcohol beverage is

subjected to 4.82 NK/Liter, which was a 1.5 percent increase from 2018.176 Juice with no added sugar’s

tax is 1.73 NK/liter which is significantly lower than other sugary beverages.177 While chocolate and other

candies tax decreased from 36.92 NK/kg to 20.82 NK/KG in 2019.178 Norway is one of the jurisdictions

which differentiate types of sugar and does not tax glucose and other natural sugars. This solved the

problem of the incapability of reformulating in the natural juice products. Another interesting part was it

170 http://www.impuestoscaloricos.com/ 171 Arturo Aguilar, E. G. (2015). Taxing Calories in Mexico. Center for Economic Research of the Autonomous Technological Institute of Mexico (ITAM). 172 Section 1 AVGIFT PÅ SUKKER MV.2017 173 Sugar tax, The Norwegian tax administration, https://www.skatteetaten.no/en/business-and-organisation/vat-and-duties/excise-duties/about-the-excise-duties/sugar/ 174 Id. 175 Tax rate 2019, https://www.regjeringen.no/no/tema/okonomi-og-budsjett/skatter-og-avgifter/avgiftssatser-2019/id2614443/ 176 Tax rate 2019, https://www.regjeringen.no/no/tema/okonomi-og-budsjett/skatter-og-avgifter/avgiftssatser-2019/id2614443/ 177 Id. 178 Id.

47

also put a tax on the food, unlike other jurisdictions which limited the imposition on the beverage solely.

Since the renewal is conducted every fiscal year, the regulator can adjust the rate more optimally than

when the renewal is less frequent.

a) Market impact

After the implementation in 1922, the tax was reformed in response to the obesity problem by increasing

the rate instead of only raising revenue. After the change, in the soft drink market, the volume per capita

decreased from 2012 until 2018 from 120.6 to 114.4 liter per year (5.4percent reduction). The reduction

in 2017 that the tax was implemented was the highest number in 5 years by 0.7 liters.179 The price per

unit slightly increased in 2017 by 3.4 percent(4.29 to 4.44 USD) and rose by 2.2 percent in 2018 .180 In

2018, the volume growth was 1.4 percent in non-carbonated drink and 0.3 percent in the carbonated

drink. which was the lowest since 2011, which the growths were 3.0 -3.7percent. Revenue also increased

by 3.1 percent in 2017-2018, which was the first-year sugar tax was passed, and like volume growth, 2017-

2018 was the year which the increment was the lowest since 2011. From 2017- 2019, the price per unit

rose from 4.44 to 4.65 USD averagely in the soft drink market.181 The price per unit was not abruptly

changed as volume and revenue. 182 Diet drinks price, which is untaxed is the same as the regular drinks

with sugar. Therefore, consumption growth stays still.

Even if fresh juice is not subjected to sugar tax and could be the substitutes for consumers, the total

consumption went down from 609.2 to 606.3 million liters in the soft drink market and from 151.7 to

127.5 million liters in the juice and nectar market.183 Moreover, the consumption per capita also shows

continuously declining since 2011, which was the year before sugar tax on beverages from 30.8 to

19.8liters per year averagely.184 This evidence thus cannot prove the direct causality of the tax in the lower

consumption since the declination occurred even before the implementation of the tax. There is no

evidence of job losses in Norway. The response of producers show that 70 retailers have agreed to

reformulate their recipes, with some cutting up to 80percent of sugar content185

179 Averagely 0.1 liter per year yet in 2017, it was 0.7-liter reduction. 180 https://www.statista.com/outlook/20000000/139/non-alcoholic-drinks/hungary#market-volumePerCapita 181 Statista Price per unit https://www.statista.com/outlook/20020000/145/soft-drinks/norway#market-revenue 182 Id. 183 Id. 184 Statista Juices, Norway. https://www.statista.com/outlook/20030000/145/juices/norway 185 Sarah Bloch-Budzier, Crossing border for a sugar fix, https://www.bbc.com/news/health-43245138

48

The proportion between the price of the products and the income or expense standards can be the factor

that affects the choice of consumers. The minimum wage on average is about 120 NK per hour(21 USD)186

while the cost of soft drinks on average is about 41 NOK(4 USD) per 2 liters bottle- price.187 This means

one hour of work can purchase 10 liters of soft drink. It might seem that the price of soft drinks is not a

significant amount to consumers in Norway; however, the expensive living cost and income tax make the

Norwegian more concerned with their expenses. The average living cost for essentials in Norway is

approximately nearly 20,000 NOK/month.188 When soft drink looks affordable for minimum wage, it is

perceived as a very expensive beverage for the locals. Imagine that few bottles of soft drink can incur the

cost of the monthly internet bill or for transportation. Not only beverage but also desserts which contain

sugar more than the threshold amount are subject to the tax. When we compare these beverages with

fresh juice, coffee, or tea, which contains no restrictive sugars, the prices are significantly different. The

price of low sugar chocolate still costs about 33.90 NOK for 100 grams. 189 Many consumers reduced their

consumption domestically and decided to cross the border to purchase desserts and sugary drinks from

nearby countries. These facts could perhaps be the contribution of the reduction among consumers.


The consumption of soft drinks was shown steadily decreased by 35percent190 within 8 years. The average

reduction is 0.12 liter per year.The overweight and obesity rate of Norway in adults in 2008 was 64.4

percent overweight and 23.0 percent obese while the female’s rate is 51.1 overweight and 20.1 percent

obese.This puts Norway on rank 77th on the global obesity rank.191 The average daily calorie consumption

of Norwegian is about 3485 calories daily192 The calories in a 250 ml can of soft drink contains 150-160

calories, the reduction of 150 calories from 3485 which is 4percent would not show any difference in the

obesity reduction. Moreover, the BMI of Norwegian was overall at 26 (25.2 in males and 26.3 in

186 https://www.lifeinnorway.net/norway-minimum-wage/. 187 Regarding the price of soft drinks in Coop 188 Apartment rental 7,000-13,000 NOK/month, gasoline 15-17 NOK per liter, 850-3000 NOK for electricity, 300- 500 NOK for phone and internet bill and 5000 NOK for food. Website and interview https://www.numbeo.com/cost-of-living/country_result.jsp?country=Norway 189 Global price, https://www.globalprice.info/en/?p=norway/grocery-food-prices-oslo 190 From 30.8percent to 19.8percent 191 Renew bariatrics, https://renewbariatrics.com/obesity-rank-by-countries/ 192 Max Roser, Food per person Empirical view, https://ourworldindata.org/food-per-person

49

females)193 in 2015. Back in 2008, BMI of Norwegian was slightly different from 2015.194 The reduction of

body mass shows before the implementation of the sugar tax.

4.1.3 Hungary

In July 2011, Hungary passed legislation195 “The Public Health Product Tax (PHPT)” to impose taxes applied

on the salt, sugar and stimulant content of various categories of foods and beverages including sugar-

sweetened drinks, energy drinks, and prepackaged sugar-sweetened products. It sets different rates on

different categories of food and beverages. 196

The rates are as follows197

Range of product Tax rate *HUF per liter or kilogram

2012 2015 2018

Soft drinks with >8g sugar/100ml 7 7 15

Soft drink concentrates and syrups 200 200 240

Energy drinks >1mg methylxanthines/100 ml

or >100 mg taurine/100 ml

250 250 300

Energy drinks >15mg methylxanthines/100 ml - 40 50

Pre‐packaged products with added sugar,

total sugar >25g/100g

130 130 160

Chocolates >40g sugar/100g and 130 130

Sugar-sweetened cocoa powder 70 70 85

Salted snacks >1g salt/100g 250 250 300

Condiments >5g salt/100g (some exemptions

for mustards, ketchups)

250 250 300

193 2014 WHO data for mean of BMI (2015) 194 25.74 for male and 26.93 for female 195 Public Health Product Tax CIII Act/2011 (PHPT) 196 European Commission, health equity pilot project (HEPP)(2016), The impact of taxes on ‘junk food’ in Hungary Case Study 197 Tax Law Changes Summary of the provisions of the summer tax package July 2018, Deloitte. https://www2.deloitte.com/content/dam/Deloitte/ce/Documents/tax-legal-highlights/august-2018/ce-tax-legal-highlights-hungary-august-2018.pdf

50

Flavored beer or alcoholic drink with >5g

sugar/100ml

20 20 25

Fruit preserves, excluding ‘extra’ versions 500 500 650

*1 euro is about 323 HUF

The sugar under Hungarian jurisdiction refers to any type of sugar which was added into the beverages

and the regulated food. It exempts milk for a drink. Like the UK, pure juice is also exempted. It covers

sugar and fat in foods as well as salt, which is the direction that Thailand is planning to follow.

The total revenue from the tax was 61.3 billion HUF(196.34 million euro) from the first 4 years.198 While

the study of Iski G. and Rurik I.199 shows that the cost of obesity in Hungary is approximately 207,000

million HUF(680 million euro) , the 4 years revenue is only 28.87percent of the annual cost of obesity.

a) Market impact

The volume per capita of soft drink temporarily dropped after the tax implementation from 96.7 liters to

84.2 liters (12.9percent decrease) and then steadily reverted again from 2013 until 2018 from 88.3 to

130.7 liter per year (48percent growth). 200 There were some drops of total volume of consumption from

2010 to 2014 from 147.2 to 118.9 million liters(19.22percent drop). Nevertheless, the volume increased

to 124.5 million liters in 2018 (4percent growth).201 The price per unit also went up from 1.32 USD in 2010

(before the tax) to 1.37 USD(3.7 percent) in 2011 and 1.42 USD (3.6 percent) in 2012. The price surged up

to 1.85 USD in 2018. The revenue went up from 1027 million USD in 2013 to 1093 million in 2014 and to

1669 million USD in 2018.

The juice is not subjected to sugar tax under Hungarian law. Thus it could be an alternative for the

consumer who wants substitution of soft drinks.

Juice consumption per capita also grew from 11.3 liters to 13.5 liters (19.4percent increase) in 5

years(2013-2018) .202 The total consumption went up from 110.9 to 131.1 million liters in the juice and

198 George, Anita. “Not so Sweet Refrain: Sugar-Sweetened Beverage Taxes, Industry Opposition and Harnessing the Lessons Learned from Tobacco Control Legal Challenges.” Health Economics, Policy and Law, 2018, 1–27. doi:10.1017/S1744133118000178. 199 Iski G. and Rurik I,The estimated economic burden of overweight and obesity in Hungary(August 2014) 200 soft drink: Hungary https://www.statista.com/outlook/20020000/139/soft-drinks/hungary#market-volume 201 Id. 202 Id.

51

nectar market in 5 years(2013-2018) .203 The price per unit increased from 2.37 to 2.30 in the same period

of time.204 Annual revenue also gradually increased from 262 million to 301 million USD.205 There is no

evidence showing job loss in Hungary. The impact assessment the National Institute for Health

Development in 2012, showed that after the tax, approximately 40percent of unhealthy food product

manufacturers reformulated their products by either reduce or eliminate unhealthy ingredients

(28percent and 12percent, respectively).206 However, the consumers only reacted in the same line with

the tax temporarily. These facts could be evidence that shows the effectiveness of the Hungarian sugar

tax, yet the effect is not sustainable.

Regarding living cost in Hungary, the minimum wage in Hungary at the time the sugar tax was introduced

was between 293.11 euro monthly thus would be around 1.83 euro per hour, the price of soda in 2011

per unit was 0.9 euro per unit.207 Soft drink price thus costs approximately 6 percent of the daily minimum

wage. The average salary is about 1063 EUR monthly. The living cost in Hungary is averagely 208 about 500

euros. Therefore, the price of soda is minuscule and cannot be considered significant. The elasticity of

demand was not sensitive.


The daily caloric intake of Hungarian is averagely 3000-3400 calories.209 The Beverage Association shows

that soft drinks represent only 2 percent of the total consumption.210 Focusing on reducing 2 percent

would not make any significant difference. Before the tax, the obesity rate in 2009 was 19.5 percent and

20.8 percent in the female. After the implementation of the tax, the obesity rate in 2012 became

28.5percent in male and 26.3percent in the female. In 2017, the obesity of the male population became

30 percent and 27percent in the female population.211 Therefore, the tax could neither reduce obesity

nor reduce the consumption in Hungary. Including obesity with overweight people, Hungary would rank

top 10 in the world.212

203 Id. 204 See. https://www.statista.com/outlook/20000000/139/non-alcoholic-drinks/hungary#market-volumePerCapita 205 Id. 206 WHO, public health product tax in Hungary: An example of successful intersectoral action using a fiscal tool to promote healthier food choices and raise revenues for public health. 207 Numbeo statistics, https://www.numbeo.com/cost-of-living/city-history/in/Budapest?displayCurrency=EUR 208 Rent for the accommodation is about 60-220 without utilities is about 209 Max Roser, Food per person Empirical view, https://ourworldindata.org/food-per-person 210 https://dailynewshungary.com/no-more-need-for-soft-drinks-in-hungary/ 211 OECD report(2012),(2014),(2017) 212 Daily news Hungary, as it turns out, Hungary is the 4th most obese country in the world, https://dailynewshungary.com/as-it-turns-out-hungary-is-the-4th-most-obese-country-in-the-world/

52

4.2 Thailand in comparison with other jurisdictions

The recommended maximum daily consumption of sugar by WHO is 24 grams a day, yet in Thailand, the

consumption is about 108 grams a day, which is over 4 times the recommendation.213 Obesity increased

and ranked 2nd highest in the region after Malaysia for the female. The scarier concern is among the monks

who are found to be obese up to 48 percent. Diabetes patients increased from 3.3 million to 4.8 million

from 2009-2014. These facts got attention many institutions from the parliament to start intervention for

internalizing externalities.214 The statistic shows that about 50percent of total sugar is used in the

beverage industries. The government tries to target sugar reduction in the beverage and believes that the

obesity situation is going to be relieved. The tax law thus was passed by the vote 136 to 7 in 2017 to be

the tool for fighting against obesity. This tax is going to be added in excise tax; thus, the beginning of this

part would explain the processes of excise tax.

Under Thai law, there are two types of tax which are applied to the consumable products, including VAT

(value-added tax) and excise tax, which varies depending on the type of products. Excise tax is usually

imposed on the products which cause negative externalities such as health, environmental impacts, and

the products in which the state wants to regulate the amount of consumption such as luxurious goods like

car or brand name products.215 Before, the regulation which ruled the tax rules and procedures was the

Excise Act BE 2527, which never mention any rules of sugary or other tax for unhealthy food and

beverages. In 2017, the Excise Act BE. 2560 which consolidates seven excise duty regulations (e.g.,

Tobacco Act, Liquor Act, Card Act, Excise Tax Act, Excise Tariff Act, etc.) into one Act was enacted.216 This

revision is the first time that included tax regarding the amount of sugar in the beverage. The first part

213 https://news.thaipbs.or.th/infographic/45 214 Tax Policy Bureau, Fiscal Policy Office, Tax policy Journal(2017), http://www.fpo.go.th/main/getattachment/General-information-public-service/Tax-Policy-Journal/5304/CNT0018134-1.pdf.aspx 215 Peeradet Detaum, Imposition of consumption tax for unhealthy food and beverages(2015) http://ethesisarchive.library.tu.ac.th/thesis/2015/TU_2015_5501034200_4224_3233.pdf 216 https://home.kpmg/th/en/home/insights/2017/10/thailand-tax-updates-26october20170.html

https://news.thaipbs.or.th/infographic/45

https://home.kpmg/th/en/home/insights/2017/10/thailand-tax-updates-26october20170.html

53

which is going to be covered is the parties that have the duty to pay tax. Under section 16217, the parties

who have to pay the duty218 are Manufacturer219, Importer220 , and Exporter221.

These parties need to pay the duty, as mentioned in section 17. The rate can be either calculated by value-

based (ad valorem)222 or quantity based (specific) in the goods and net income based on the service

section. There are 16 categories of goods which the manufacturers bear the responsibility of duty which

are

1) Oil or oil products

2) Beverages

3) Electric devices

4) Batteries

5) Glass and crystals products

6) Automobiles

7) Motorcycles

8) Water vehicles

9) Cosmetics and fragrances

10) Carpets and textiles

11) Marble and granites products

12) CFC products223

13) Alcohol drinks

14) Tobacco

15) Cards

217 Section 16 “A Operator of the manufacturing premises, service provider, importer and any other person specified under this Act to be responsible to pay tax shall pay tax in accordance with the value or amount of goods or service for the rate prescribed in the law on Excise Tariff used during the time which the liability to pay has occurred.” 218 Thai Excise Act BE.2560, Section 4 “Duty” means a customs duty collected from goods imported into or exported out of the Kingdom under this Act and the law on customs tariff or other laws specifying it as a customs duty.” 219 Section 4 “manufacturer” shall include owner, possessor, director or other employees who have responsibility in the operation of the place where such goods were manufactured. 220 Section 4 “Importer” shall include an owner, a possessor or an interested person in any goods as from the time of the importation until the time a customs officer duly releases such goods from his custody 221 “Exporter” shall include an owner, a possessor or an interested person in any goods as from the time such goods are delivered to a customs officer’s custody until the time of exportation; 222 Value herein means “Suggested retail price” which is set by the suggested price by manufacturers or importers to the director general for approval. In case the price is not approved, the suggested price shall be the market price of such product. Section 18 223 CFC

54

16) Other products which are announced

Sugar tax is mentioned in chapter 2 of the annex under the beverage category.224 The beverages which

are subjected to the new excise are225

1. Artificial mineral water, soda water, and carbonated soft drinks without sugar or other sweeteners and

without flavor.

2. Mineral water and carbonated soft drinks with added sugar or other sweeteners or flavors; and other

nonalcoholic beverages

3. Fruit and vegetable juices

4. Coffee and tea

5. Energy drinks

6. Beverage concentrates on being used with beverage vending machines for distribution in retail areas.

To lessen impacts on the manufacturers and the industries, the excise tax department decided to stick

with ad valorem like in the past with a lower amount and applied the sugary drinks tax on the products.

Ad valorem is still applied for 14percent of the suggested retail price instead of 20percent of the CIF value

and will renew every 2 years. The sugar tax will be applied to the beverage based on the amount of sugar

per 100 ml. The manufacturers can either test the sugar by themselves or by the international excise

standards (e.g., official method of analysis of AOAC international or ISO/IEC 17025).

Under Thai law, the definition of sugar covers every type of sugar regardless of whether it is natural or

added sugar and relying on the nutrition facts which the product received from the Food and Drug

Administration. In the case of reformulation, the manufacturer needs to file the new report about sugar

content. Animal milk products, either natural or with flavors, are exempted from such tax. Vegetable and

fruit juices226 that do not have carbon dioxide with lower than 5 mg of caffeine are exempted from VAT

yet still fall under sugar tax until September 2019. The exemption was made for supporting agricultural

section which might be affected by the policy. The rate between September 2017-September 2019 starts

from

0percent for the beverage which has sugar lower than 6 g/100 ml

224 Chapter 2 annex Thai Excise Act BE.2560 225 Thailand Thai Excise Department Implements New Sugar Tax, https://gain.fas.usda.gov/Recentpercent20GAINpercent20Publications/Thaipercent20Excisepercent20Departmen 226 Government Gazette, book 135 ตอนพเิศษ ๔๐ ง, Concentration range from 02-10 percent,

55

0.10 THB/ liter for the beverage which has sugar more than 6g but less than 8 g

0.30 THB/liter for the beverage which has sugar more than 8g but less than 10 g

0.50 THB/liter for the beverage which has sugar more than 10 g but less than 14 g

1.00 THB/liter for the beverage which has sugar more than 14 g

And the rate will be recalculated in October 2019- September 2021

The rate will change by adding 3THB per liter for the beverage which has sugar more than 14 g but less

than 18 g and 5 THB per liter for 18 g or more.

And the next rate will be updated in 2021 and every 2 years until it reaches the maximum rate in 2027 the

tax will be 20-30percent of the suggested retail price with no ad valorem involve.227

The revenue deriving from this tax was 4000 million THB (about 125million USD) in the year 2017-2018.

The new rate will gain revenue by 7000 million THB (219 million USD). 228 Tax is spent on medication

treatment, free TV channels, ministry of health, and sports facilities. The revenue is about 30 percent of

externalities.

Here, in comparison with the other jurisdictions, Thailand is one of the jurisdictions that does not impose

the tax regarding the volume of the beverage but rather by sugar content. One study suggested that taxing

based on sugar content is the best method to reduce the consumption of sugar from beverages. By taxing

on volume-based, it ignores the nature of the beverage sugar content. In a liter of soft drink and

reformulated soft drinks contain different amount of sugar, the tax thus does not differentiate and put

impact the product, which provide fewer externalities. The tax would not effectively impact the

consumers' behaviors because the consumer could swap from a larger decently sweet beverage to the

smaller but much sweeter alternative. The scope under that law is the best among three approaches,

which are by volume and by retailer price. Nevertheless, even if the tax on sugar content is shown to be

the most effective way to put the tax to encourage the positive change among consumers as well as

manufacturers, it also has downside as well. When the consumer consumes high volume of low sugar

content beverages, the total amount of sugar would be as high as the small volume of the high sugar

content beverages. When the consumer gets unlimited refill such as in Fast food chains, they will not pay

tax for their excessive consumption.

227 Section 4 Excise Act: Suggested retail price means “The price which the retailors or manufacturer wants to sell to the consumers.” 228 https://www.thairath.co.th/news/business/1517020

https://www.thairath.co.th/news/business/1517020

56

Regarding the rate of tax on the products, the current rates in Thailand range from 0.1-1 THB, which is the

current range from 1-10percent of the beverage price. Mexico uses a flat rate at 1 peso per liter for all

carbonated drinks and sugar-sweetened beverages. Norway adds different rates from 4.82 NOK per liter

to the higher rate on desserts. It also adds about 1.73 NOK/liter for non-sugar added juice and Hungary

adds 15 HUF per liter for regular sodas. Among all countries herein, Thailand poses the lowest tax among

countries.

a) Market impact

This part will analyze by starting from the consumption per capita, sale volume, and revenue, price per

unit, employment, the sugar market, and the government’s revenue.

The volume per capita steadily grew until 2015 and declined until 2018 from 27.6 liters per year to 27.0

liter per year, which was an insignificant amount for a non-carbonated soft drink.229 In a carbonated soft

drink, the consumption declined from3.7 liter per year to 3.5 liters per year between 2015 and 2018.

According to the soft drink market statistics, the consumption of soft drink slightly dropped from 2122

million liters in 2017 to 2111 million liters in 2018.230However, the revenue of the manufacturers went up

from 2950 to 3030 Million USD in the same period.231 The price per unit increased from 1.44 USD to 1.49

USD (3.4percent) for non-carbonated soft drink and 0.97 to 0.99 USD (2percent) in a carbonated soft

drink. The average price from both categories rose by 5percent from 2018.232 When it comes to the

increment of the price per unit, a 12percent increment was found in the Mexican market, 7percent in

Norway in 2 years of implementation, and in Hungary, the price significantly increased. However, it could

be from the higher minimum wage and the inflation rate in 2011 and 2012 in Hungary. The volume slowly

grew since 2011 and started declined in 2015-2018. The most severe reduction was in 2016-2017, which

was 0.6percent declination. The declination in the year before was similar to 0.4percent.233 In 2015, the

GDP of Thailand shrank in 2013-2015 and could perhaps be the factor which contributes to the loss of

consumption volume in 2015-2018.

229 https://www.statista.com/outlook/20020000/126/soft-drinks/thailand#market-revenue 230 https://www.statista.com/outlook/20020000/126/soft-drinks/thailand#market-revenue 231 Id. 232 Id. 233 Id.

https://www.statista.com/outlook/20020000/126/soft-drinks/thailand#market-revenue

https://www.statista.com/outlook/20020000/126/soft-drinks/thailand#market-revenue

57

In the juice market, including apple, pineapple, grapefruit, grape, and other juices, the consumption

volume increased from 667.8 million liters to 670.6 million liters.234 The average price per unit increased

from $1.95 to $2.04 (3percent) from 2017 to 2019.235 In the juice market, the declination could be noticed

from 2011 until 2018; the loss ranged between 0.1-3.9percent. The most significant loss was in 2015-

2017, which was over 3.5percent loss; in 2014 to 2015 the purchasing power of Thai people dropped by

0.44 and 0.34 percent which is much higher than other years except 2009 which was the year after

financial crisis.236 Thus it is likely to be the more important factor which causes the reduction of

consumption volume.

In sum, the average consumption per capita of soft drink in Thailand declined after the tax is 0.2 liter

while the year before averagely declined by 0.3 liters, which means the reduction is barely noticeable. In

Mexico, the reduction is much more significant with 12percent reduction. In Norway, the reduction was

steadily declined with the unusual declination in 2017, which was the year that the law was introduced

at 1.5 times more than regular rate. In Hungary, the reduction was found yet only temporarily. It reverted

by 48 percent in 5 years. Among all chosen jurisdictions, Hungary is the one that the market impacts turn

insanely opposite to the theory.

A raw material producer who is expected to be directly impacted, such as sugar cane growers did not

seem to get the adverse effect. The total production of sugar and sugar products increased by 30K MT

between 2017-2019.237However, the demand for domestic consumption and the total use declined about

50K MT.238 Farm prices declined from 880 to 800 baht per ton. The loss of sugar cane price still seemed

to get no compensation or solution.239 A lot of farmers started to grow other alternative plants and strived

to sell sugar for another purpose besides food.240

234 https://www.statista.com/outlook/20030000/126/juices/thailand#market-arpu 235 Id. 236 Purchasing power parity conversion factor for gross factor for gross domestic product, http://knoema.com/atlas/Thailand/topics/Economy/Inflation-and-Prices/Purchasing-power-parity 237 Appendix table: table1 https://gain.fas.usda.gov/Recentpercent20GAINpercent20Publications/Sugarpercent20Annual_Bangkok_Thailand_4-12-2018.pdf 238 Id. table 2 239 https://www.bot.or.th/Thai/MonetaryPolicy/NorthEastern/Doclib_Seminar60/41_Paper_SugarcaneIndust.pdf 240 KENTARO IWAMOTO, Southeast Asian sugar taxes: Bitter pills for better health https://asia.nikkei.com/Spotlight/Asia-Insight/Southeast-Asian-sugar-taxes-Bitter-pills-for-better-health

https://www.statista.com/outlook/20030000/126/juices/thailand#market-arpu

https://gain.fas.usda.gov/Recent%20GAIN%20Publications/Sugar%20Annual_Bangkok_Thailand_4-12-2018.pdf

https://gain.fas.usda.gov/Recent%20GAIN%20Publications/Sugar%20Annual_Bangkok_Thailand_4-12-2018.pdf

https://www.bot.or.th/Thai/MonetaryPolicy/NorthEastern/Doclib_Seminar60/41_Paper_SugarcaneIndust.pdf

https://asia.nikkei.com/Spotlight/Asia-Insight/Southeast-Asian-sugar-taxes-Bitter-pills-for-better-health

58

Many manufacturers started to reformulate their products. The goal is decreasing the amount of sugar to

be exempted from the tax. Major global brand such as Coca Cola or Pepsi has not yet reformulated their

products due to the homologous formula which makes their products hard to reformulate and the concern

that the reformulation can degrade the taste of their products and would affect the reputation.241 In

Thailand, the other manufacturers for juice and soymilk started to change their formula, especially

Lactasoy, which decreased sugar to be under 6 grams per 100 ml. This reformulation changed the demand

for sugar in the beverage industries. According to the Thai office of Cane and Sugar Board, the beverage

makers used 440,000 tons in 2017, down from 540,000 tons the previous year.242 Moreover, sugar, which

is used in snacks dropped to 29,000 tons from 36,000 tons in 2017.243 The reformulation for the fruit juice

is more challenging than the vegetable juice due to the nature of the natural sweetness of the fruits. The

new product which removed sugar and substitutes with stevia got some interest since it was available.

The problem which could be noticed was some manufacturers decided to raise the price of their products

up even if their products contain less sugar than their competitors. Coffee and tea are all made available

in unsweetened products and made an excellent performance in the first year it came out. Besides the

effect of the tax policy, health and fitness trends changed the dietary behaviors of teenagers and

millennials and resulted in less consumption of sugar and unhealthy food.


According to WHO statistics, in 2016, Thailand has 32.6 percent of the population were overweight, and

10 percent were obese.Other statistics show that in 2016, the obesity rate was 12.46 percent. After-tax,

the obesity rate went up from 12.64 in 2017 to 12.8 percent in 2018. 244 Since BMI is the determinant for

obesity, the trends of BMI can be used as evidence of obesity rate. Average caloric intake and physical

activity level are the determinants of the reduction in the long term thus are chosen here for prediction.

In 2000, Average BMI in Thailand was 23.235(24.09 of male and 23.28 in female).245 Before the tax,

average BMI in Thailand was about 24.4 kg/𝑚2(23.7-25.224.4 kg/𝑚2) in 2016.246 Currently, the average

BMI in Thailand according to information of world data is approximately 24.40247(23.8 in the male and

241 Id. 242 Eric Chow, Southeast Asian sugar taxes: Bitter pills for better health(12 March 2019) https://asia.nikkei.com/Spotlight/Asia-Insight/Southeast-Asian-sugar-taxes-Bitter-pills-for-better-health 243 Sugar Asia Magazine, Sugar Reduction Trend Strong in Southeast Asian(24 April 2019) http://sugar-asia.com/sugar-reduction-trend-strong-in-southeast-asian/ 244 International futures at the pardee center. http://www.ifs.du.edu/ifs/frm_CountryProfile.aspx?Country=TH 245 Size thailand.org 246 WHO, Global Health Observatory Data (2016), https://www.who.int/nmh/countries/tha_en.pdf?ua=1 247 World data https://www.worlddata.info/average-bodyheight.php

59

25.0 in the female). There is no difference in BMI after the implementation of the tax. This also follows

the same direction as Mexico and Hungary whose citizens are not getting slimmer even after years of

sugar tax. In Norway, the slower growth can be seen yet it might be different in the long term. Its reduction

of consumption as well as BMI can be noticed but very slowly. The reduction began before the tax

imposition and can be presumed that the tax barely poses significant impacts. The average Thai daily

calories of consumption are 2500-2784 calories and going to increase based on the evidence that shows

the steady increase of consumption. Among all jurisdictions, the average calorie intake in Thailand is still

the lowest.

4.3 SUMMARY

These are the difference between each jurisdiction in the legal content, rate, economic impacts, and

effectiveness of reducing obesity.

4.3.1 Legal content and scope

In Mexico, the beverages under these jurisdictions are any beverages besides pure juice, fresh milk, and

flavored milk. Artificial sugar is considered as sweetener. The threshold amount of sugar is not specified.

So long as the beverage falls under the categories which are subjected to the tax. In Norway, there are

some differences; the tax covers both desserts and beverages. The desserts such as chocolate and sugar

products contain granulated sugar, Icing sugar, Rock candy, Refined, Pearl sugar, syrup, and sugar

solutions. All beverages which contain sugar besides fresh juice, milk, and flavored milk are subjected to

the tax. Diet drink, which contains artificial sugar, doesn’t fall under the tax like in Mexico. The threshold

amount of sugar is also not specified. It makes any levels of sweetness fall under the same tax rate. Under

the concentrate categories, the rate would be higher than the regular soft drinks, and on the pure juice

category, the rate is lower than the soft drink rate. In Hungary, the scope and content of law work similar

to Norway except the threshold amount of sugar are added. It also differentiates more categories than

Norway. Soft drinks, energy drinks, ready to drink powder and alcohol drinks, which contain sugar are

subjected to the tax. Thus milk, juice, other sugary beverages are exempted. Hungary also taxes sweet

chocolate(sugar over 40g per 100 g) and candies. It also add the tax to salty snacks(1000mg/ 100 g). The

threshold amount of sugar is 8 g/100 ml for beverages. Similar to other jurisdictions, sugar tax in Thailand

covers all categories of beverage which contains sugar. Unlike others which fruit juices are exempted like

60

Hungary or Mexico or got lower rate like in Norway, it poses the same rate on fruit juice as other

beverages. None of the jurisdiction imposes tax on milk or flavored milk products.

4.3.2 Rate

All three jurisdictions, including Mexico, Norway, and Hungary, set their rate by volume. Mexico imposes

a flat rate at 1 peso per liter to any type of beverage. Norway does slightly different by differentiates

beverages according to their characteristics and set the different rates on them. For regular non-alcohol

beverages soft drink, it sets 4.82 NOK/liter. 8.25 NOK/kg rate is set on desserts besides chocolate. For

chocolate, the rate is 20.82 NOK/kg. Hungary also does a similar system as Norway, yet it differentiates

beverages in a slightly different way. The rate for most non-concentrated soft drinks is 15 HUF/liter.

Energy drinks get their own rates 2 rates, which can be 300 HUF, or 50 HUF depends on type. For candies

which the sugar is over 25 g/100g, the rate is 160 HUF/kg. Condiments and salty snacks rate are 300

HUF/kg. In Thailand, the rate is quite different from other jurisdictions. Unlike other three countries,

Thailand does not impose the tax regarding volume of the beverage but rather by sugar content. The more

concentration of sugar the beverage has, the higher rate it has. Currently, it applies the rate by sugar

content for allowing the manufacturer to reformulate and bear the relatively low extra cost. In the future,

it aims toward ad valorem. The current rate now is calculated regarding the sugar content per 100 ml. The

rates are progressive which are (1) 0percent for the beverage which has sugar lower than 6 g/100 ml, (2)

0.10 THB/ liter for the beverage which has sugar more than 6g but less than 8 g, (3) 0.30 THB/liter for the

beverage which has sugar more than 8g but less than 10 g, and (4) 0.50 THB/liter for the beverage which

has sugar more than 10 g but less than 14 g.

This method is proved to be the best method to influence the manufacturers to change their formula with

the reward of lower taxes on the lower sugar content. However, when the sugar content is reduced in

most products, the revenue from sugar tax would be lower.

4.3.3 Market impacts

The impacts which are found in Mexico are the reduction of consumption per capita by 12percent in the

first year, yet the consumption per capita rebounded in 2015.248 The price per unit went up by 12percent

248 INEGI, Monthly Survey of the Manufacturing Industry. KPMG, Annual Report of the soft drink industry. https://www.fooddrinktax.eu/wp-content/uploads/2018/07/IEPS_Why-the-STPS-to-soft-drinks-is-a-bad-idea_-1.pdf

61

after the first year of tax. 7100 job loss was reported with the possibility of the higher number.249 The

revenue from tax is 18,255 million MXN (855 million euro) in the first year. In Norway, the consumption

per capita declined about 0.7 liters per year after the first year of imposition. The price of taxed products

went up by 20 cents. There was no evidence showing job loss in Norway as well as Hungary. This could be

from the fact that in Mexico, soft drink industries offer thousands of jobs while in Norway and Hungary,

it is not an important part of the national revenue. The consumption in Hungary moved in the decline

direction from the first year of taxation until 2013 which it reverted and continuously went up by

48percent from 2013 in 2018. The revenue was reported to be about 207,000 million HUF(680 million

euro) in 4 years of the imposition.250 In Thailand, the consumption was also found to have decreased;

however, it decreased even before the tax. Price per unit increased in the taxed beverages as well as the

untaxed beverages who took advantage of the higher price from the tax. The revenue was reported to be

about 4,000 million THB (about 125million USD) in 2017-2018. As volume-based could be one of the most

effective ways to raise revenue, the revenue from sugar content-based tax in Thailand is lower.

4.3.4 Effectiveness on reducing obesity

According to all available evidence regarding obesity rate, BMI of the population, or average daily calorie

intake. There is no evidence showing the positive change in any of the determinants of the obesity

reduction. BMI and daily calorie intake in Mexico remains the same with the higher consumption per

capita. In Hungary, the result is not only not positive, but it even gets worse. The average obesity rate of

Hungary is going to be one of the highest obesity rates in Europe251 even if it was one of the pioneer

nations of sugar tax. In Norway, the decrease in consumption is shown yet obesity remains relatively

stable. Last, in Thailand, the obesity rate, average BMI, or daily calorie intake has not shown any significant

positive change. Consumption per capita also decreased temporarily. Even if there is no sign of

successfulness in the war with obesity from any jurisdiction, it could be too premature to conclude that

the tax posed no positive impacts at all and shall be repealed. Even if there is no evidence that supports

249 The tax has raised revenue but HAS HAD NO EFFECT ON obesity, https://www.ameribev.org/files/resources/effects-of-the-mexican-soda-tax.pdf 250 George, Anita. “Not so Sweet Refrain: Sugar-Sweetened Beverage Taxes, Industry Opposition and Harnessing the Lessons Learned from Tobacco Control Legal Challenges.” Health Economics, Policy and Law, 2018, 1–27. doi:10.1017/S1744133118000178. 251 Alexandra Beni, Shocking result: Hungarians are the fourth most obese nation in the world(26 May 2017), https://dailynewshungary.com/shocking-result-hungarians-fourth-obese-nation-world/

62

the successfulness of the obesity reduction goal, the revenue from sugar was a substantial amount that

could support many sections that help increasing physical activities and to educate people.

Summary table

Countries Mexico Norway Hungary Thailand

Scope All beverages with any sweeteners, whether artificial or natural sweeteners with no threshold amount of the sweetener.

All chocolates and candies and beverages. Chocolates and candies contain granulated sugar, Icing sugar, Rock candy, Refined, Pearl sugar, syrup, and sugar solutions. Beverages that contain natural sugar are all subjected to the tax. Still, have no threshold amount of sugar.

Soft drinks with >8 g of sugar per 100 ml Soft drink concentrates and syrup Energy drinks >1mg methylxanthines/100 ml or >100 mg taurine/100 ml Energy drink Energy drinks >15mg methylxanthines/100 ml Pre-packed products with sugar over 25 g/ 100g Chocolates >40g sugar/100 g Sugar-Sweetened cacao powder Salted snacks 1g/100g Condiments Alcohol drinks with sugar >5 g per 100 ml Fruit preserves

All beverages which contain natural sweeteners

63

Exemption Pure juice Milk and flavored milk Yogurt drinks

Pure juice, milk, and flavor milk. Beverages with artificial sweeteners. Yogurt drinks

Beverages with artificial sweeteners. Milk and flavored milk Yogurt drinks

Beverages with artificial sweeteners. Milk and flavored milk

Methods By volume

By volume Varies among products

By volume with threshold amount or sugar or salt

By sugar content

Rates Flat rate (1 peso per liter)

4.82 NOK/liter for beverages 8.25 NOK/kg for desserts besides chocolate 20.82 NOK/kg for chocolate

Soft drinks with >8 g of sugar per 100 ml: 15 HUF/1 liter Soft drink concentrates and syrup: 240 HUF/liter Energy drinks >1mg methylxanthines/100 ml or >100 mg taurine/100 ml: 300 HUF/liter Energy drink Energy drinks >15mg methylxanthines/100 ml: 50 HUF/liter Pre-packed products with sugar over 25 g/ 100g: 160 HUF/kg Chocolates >40g sugar/100 g: 130 HUF/kg Sugar-Sweetened cacao powder: 85HUF/kg Salted snacks 1g/100g: 300 HUF/kg Condiments: 300 HUF/kg Alcohol drinks with sugar >5 g per 100 ml: 25 HUF/liter

0percent for the beverage which has sugar lower than 6 g/100 ml 0.10 THB/ liter for the beverage which has sugar more than 6g but less than 8 g 0.30 THB/liter for the beverage which has sugar more than 8g but less than 10 g 0.50 THB/liter for the beverage which has sugar more than 10 g but less than 14 g

1.00 THB/liter for the beverage which has sugar more than 14 g

64

Fruit preserves: 650 HUF/kg

Market impacts

Job loss 7100 job losses were reported Price per unit Increase by 12 percent Consumption per capita Temporarily decrease and grew back to the same point

Job loss No evidence showing job losses Price per unit 3.4 percent increase from the year before tax Consumption per capita 0.7 liter decreased in the first year that the tax is imposed

Job loss No evidence showing job losses Price per unit Increase by 3.7 percent on the first year of tax and 3.6 percent on 1 year after tax Consumption per capita temporarily decreased for 3 years and grew back beyond the starting point

Job loss No evidence showing job losses Price per unit 1-10percent of the price Consumption per capita: steadily increased

Effectiveness Average BMI: no change Obesity rate: increase Daily calories intake: 6 calories decrease

Average BMI: no change Obesity rate: slightly decrease Daily calories intake: no change

Average BMI: no change Obesity rate: increase Daily calories intake: no change

Average BMI: no change Obesity rate: increase Daily calories intake: increase

65

CHAPTER 5: Challenges in the Implementation of the Sugar tax

This chapter will address the challenges in the current sugar tax in Thailand and suggest an improvement

for more effectiveness. It has been years since the government started to impose tax policy to solve the

obesity problem and improve the public welfare with the ultimate goal of reducing obesity rate within the

country and the different products on the market yet it seems many challenges are needed to be solved.

So far, there are no researches showing there is obvious effectiveness of sugar tax in reducing obesity in

any jurisdictions. The consumption is overall decreased in many jurisdictions, whereas obesity is not under

control. In Thailand, statistics show that the consumption volume decreased by 0.2 liters per capita since

the imposition of tax, and the total volume decreased by 11 million liters.252 However, the graph shows

that the decrement began in 2015, which was before the tax imposition. The decrement rate was not

abnormally more rapid after the implementation of sugar tax. This proves that tax is not the only factor

that triggers the reduction. It could be premature to conclude that the tax is not effective at all since

obesity problem needs time to be resolved. Therefore what we are going to illustrate in this chapter is

how much the tax was designed regarding theories. There could be 5 challenges according to theories

aforementioned. The challenge that could make tax policy not as effective as it should be can be:(1)

Inaccurate and unfair focusing, (2) Practicality (3) Cost for substitutes, (4) regressivity and (5) Political

lobbying (6) uncontrolling pass-through tax

5.1 Inaccurate and unfair focusing

As we know that when the quantity of consumption goes beyond the efficient quantity, the negative

impact could happen from such excessive consumption. In this case, when the people consume too much

sugar either from food, beverages or the sugar in the condiments, the negative impact such as cost of

medication and treatment, cost of staffs who take care in medication and treatment, as well as cost of

premature death and the lower work capability, would occur and affect the society of the consumers.

Obesity thus causes externalities, which cause externalities thus shall be relieved by the intervention of

the state or nation. Pigouvian tax is a mechanism that is going to be used in response to such problems.

However, in order to maximize the effectiveness of the tax, the cause of externalities must be precisely

and completely specified. It might seem like sugar is the cause of obesity. However, the real cause of

252 Soft Drink(Soft Drinks category are the Coca-Cola Corporation, PepsiCo, Suntory, Red Bull and Keurig Dr Pepper.) statistics,https://www.statista.com/outlook/20020000/126/soft-drinks/thailand#market-volume

https://www.statista.com/outlook/20020000/126/soft-drinks/thailand#market-volume

66

obesity is the overconsumption which can occur from any excessive amounts of macronutrients. It is true

that sugar can elevate blood sugar levels and deteriorate insulin in the long term; it is not the only cause

of obesity. Researches from Mexico and Hungary show that calorie intake from sugar represents only 2-

5percent of the total daily consumption thus reducing those 2-5percent and leave the other 95-98 percent

untouched is not going to achieve the effective outcome. While these minuscule fractions are strictly

taxed, the larger fraction is free from any tax. The government is now focusing only on the narrow spot.

Other larger fractions can be food, desserts which are not candies or beverages from café. Not only sugar

in the liquid form does not give the full feeling but also oil and fat. Oily food thus can give high calories

even in the small serving size while does not make the eaters feel full. Besides the food, beverages from

café can also give extremely high unnecessary calories. For instance, Starbuck coffee, venti eggnog latte

has 74 g of sugar, and 24 g of fat and the total calories is 529 calories (28percent of daily suggested

calories)253, Costa black forest hot chocolate has 60 g of sugar and 26 g of fat with 548 calories in total. Or

even in the popular drink such as boba tea, there is 44.75 g of sugar and 20 g of fat with 487.5 calories in

total (16 oz. size).254 Not only Starbuck but also other places which serve the high calories beverages can

cause weight gain and obesity. The calories from these beverages can account about 25-50percent of the

essential calories of most people. Another issue that the government makes is targeting the products

which cause no externalities. For instance, diet soda with 0 calories, study from American psychological

association255 shows that aspartame or other artificial sweeteners cannot cause weight gain. When such

beverage cannot lead to weight gain, it cannot give externalities and can be a substitution for the

consumers.

Inequality under taxation principle is also infringed.256 Some instant power drinks such as Ovaltine,

Nesvita, Milo, Nescafe or other chocolate, malt or coffee also contains high sugar yet get exempted from

sugar tax unfairly. Political Lobbying might be behind this outcome and would be explained in the next

part of this chapter.

253 Nick McDermott (2011), the festive coffee shop treats that contain more calories than a double cheeseburger. https://www.dailymail.co.uk/health/article-2069842/Starbucks-Costa-festive-treats-contain-calories-McDonalds-double-cheeseburger.html 254 https://www.bobateadirect.com/bubble-tea-nutritional-info.html 255 American Psychological Association. "Artificial Sweeteners Linked to Weight Gain." ScienceDaily. ScienceDaily, 11 February 2008. <www.sciencedaily.com/releases/2008/02/080210183902.htm>. 256 OECD, 2014, Fundamental Principle of Taxation, https://www.oecd-ilibrary.org/docserver/9789264218789-5-en.pdf?expires=1561218360&id=id&accname=guest&checksum=E30289FADB9B5D135D6E0EABCD8725C9

67

This tax also treats all sugar the same while neglecting the nature and ability of each sugar to cause

obesity. Not all sugars are the same. Some are less harmful to health than others. For instance, glucose is

more negative to the body than fructose and lactose.257 Or another example can be juice. Besides

fructose, fresh fruit juice has vitamins and minerals, which is nutritionally beneficial to the body. When

juice is appropriately consumed, there are no externalities like consuming other sugary drinks such as

energy drinks or soft drinks that have no nutritional value. Juice is thus should not be imposed the same

rate of tax as other unhealthier products. The government is targeting too narrow spot and the products

which generate no externalities while neglecting the products that can cause externalities. For instance

chocolate milk. Regarding aforementioned legislation, every jurisdiction exempt flavored milk products

from tax; it overlooks one of the high calories beverage. In a cup of milk(250ml), there are 24 grams of

sugar which is the maximum amount that is recommended to consume in one day thus it is one of the

high sugar beverages that can lead to obesity as much as the other sugary beverages. Different types of

sugar can also impact the body in different ways. Glucose is the most harmful type of sugar, which can

easily lead to obesity, whereas lactose can barely cause obesity. The nature of products thus shall be

researched in-depth for accurately targeting the real causations. These inaccurate targeting of the

government would lead to the suboptimal effectiveness of the intervention. Another aspect is perhaps

The government thus shall reconsider the scope of law and try to cover all causes of externalities in order

to make them more effective regulation.

5.2 Practicality

According to pigouvian tax theory, the cost of counterbalance of externalities must be just right

designated. The next challenge is thus the designation of the need for intervention. When the policymaker

aims to counterbalance externalities, the externalities must be fully and accurately addressed for the

precise level of intervention. In practice, there are more unpredictable factors such as personal

preferences or brand loyalty, which can affect and pose challenges to the effectiveness of intervention.

When the intervention is insufficient, the change in consumption will not reach the expected level, and

the desired goal would not be achieved. When the cost is estimated too high, the consequences will widely

negatively impact the industries. If there is a job loss problem, criminal and homeless problem can come

after. Thus, it is terrifically necessary to carefully impose the tax to the optimal amount for the change,

however, as Jonathan s. Masur and Eric A. Posner mentioned in their study, the administration in practice

257 More details can be found in the annex

68

is much more difficult than in theory. When we calculate with marginal social cost uniformly, some

exceptions would be overlooked and neglected. The example that was given was sugar and fat tax. It can

be true that sugar and fat can cause externalities to many people, yet in so many cases, they also do not

pose any externalities in many people, even with the high quantity of consumption. It would be inaccurate

to calculate all consumption of individuals to be social cost because not every case that excessive sugar

and fat pose externalities to society. It is also against the theory of choice, which held that individuals

should have the right to the extent that there are no impacts on the public interest and welfare.

Moreover, the level of tax also matters in this case. The level of tax must also be designated in the just-

right level for the most efficient return. It is more challenging than in theory due to the difference between

consumers in the market. The different mindsets could impact the price elasticity of demand. Some

consumers could be very sensitive to the change of the price while others could react nothing to the

insignificant change of the price. The outcome thus could be not in accordance with the calculation or

prediction. Even if the tax rate is set quite high and the consumption of sugary beverages drastically

declines as, in Norway, externalities from obesity would not be relieved without expanding scope of the

law to cover other major factors of obesity. To make this tax effective thus more difficult than in the theory

which disregards any other extra factors.

Besides the accurate addressing the issues and externalities, the revenue from internalization should

come close to the cost of externalities in order to counterbalance. As statistics and studies show, cost of

externalities is still far beyond the annual revenue from tax; this challenge is extremely difficult to solve.

Obesity causes externalities in the long term and requires sufficient consistent revenue to internalize the

negative impacts. The cost for internalizing also changes every year and requires a close monitor as well

as revision as appropriate. Only when the price is set at the level of the efficient price of a certain moment,

the revenue could cover the negative impacts cost at that time. The calculation result for this moment

would not be the efficient amount of the next period. Even if the calculation can determine the efficient

amount of tax that can internalize externalities, it does not always mean that amount is reasonable in

practice. For example, Mexico which imposes tax on sugary beverages over until the price becomes

20percent of daily minimum wage still cannot reach the efficient amount for internalizing (860 million

69

USD revenue while externalities are about 1.2 billion USD258). It probably needs to raise tax up almost 1.76

times, which could make soft drinks’ price become 35.2 percent of daily minimum wage of the people. In

that circumstance, it is likely to be unfair to reduce the purchasing power of the lower-income individuals

who have no obesity problems.

Besides the limitation of the design of the tax, behavioral issues also cause difficulty in practice. As

previous chapters explained that in some cases, the behaviors of individuals could be irrational from

personal preferences as well as brand loyalty. Even if there is tax imposed on the favored products or

brands of one, that individual is not likely to change his consumption behavior due to his personal

preferences or habits. In this case, it might seem impossible to expect every individual to change their

behavior by imposing tax on their regularly consumed food or beverages. Moreover, the change that he

makes can be reducing the consumption of other food and prioritize his favored soft drinks. This outcome

can be worse than even without any tax policy. The government thus shall promote the change in media

or by education and facilitate the transition of consumers who want to switch to healthier options.

As a result, the practicality of several aspects including scope, determination, affordability at the efficient

price and behavioral issues are the challenges which the regulator needs to solve in order to make tax

policy efficient and complied with all principles.

5.3 Cost for substitutes

As we demonstrated in the previous chapter that the elasticity of sugary beverages could fluctuate either

relatively low or high depends on the brand and geographic area of the market. Soft drink and juice, which

are the most consumed in the beverage market, are quite highly elastic products. Therefore, when the

price is increased, the demand for consumption would decline as supply-demand theory. At the beginning

of the tax implementation of jurisdictions in the study, the consumptions have noticeably declined.

However, in Mexico and Hungary, where the first taxes were executed, the consumption temporarily went

down and after 3 years of the tax, reverted against the prediction amount under the price elasticity of

demand result of soft drink which predicts the consumption to be steadily decreased. One of the

significant causalities which make the outcomes different from elasticity of the price theory is perhaps the

availability and cost of substitutes. Diet drinks which are similar in taste and texture while providing no

258 Sodexo, the social and economic cost of obesity in Latin America: a call to action https://www.sodexo.com/files/live/sites/com-wwd/files/02percent20PDF/Reports/201801-Latam-Obesity-Costs.PDF

70

calories are thus the available substitutes for soft drinks, juice or energy drinks for consumer. Water could

be either be considered as a substitute by some scholars when construed broadly or not a substitute in

the narrow interpretation on the ground that its characteristics and taste is not comparable with other

sugary beverages. For instance, coke zero price is equal to the regular coke as well as other diet drinks of

other soda, juice with stevia sweetener259 cost less than the regular juice about 8percent260 but available

only in few types of flavors. Nevertheless, the price of those diet drinks is set at the same level as the

regular sugary beverages. When the substitutes are available, but the price is not different from the

regular beverages, the consumers lack motivations to switch to healthier substitutes. In some countries

such as Scandinavian countries that bottled water costs more than sodas and tap water are available

costless with excellent quality, the substitution would likely not to occur. Thus, there shall be some actions

that either provide subsidies or control the price of the substitutes. Information shall be provided to the

consumers to make them realize the advantages of switching to healthier substitutes. The revenue from

taxing the unhealthy food shall be partly spent on incentivize individuals to switch to the more affordable

alternatives either by controlling the price to be more affordable or more accessible.

Besides the price and accessibility of healthier substitutes, the other concern can when consumers

consume less healthy options for affording more unhealthy alternatives. For instance, in order to afford

Coke, the consumer stops eating lunch, which could be healthier. This can also be another challenge that

is extremely hard to solve without the appropriate management. People can always have uncommon

preferences and react not compliance with the theory and prediction.

Not only the consumer side that can react differently from the rule but also the manufacturers. There are

2 concerns that can be the challenge that the government needs to take part in the manufacturer section.

First, after the imposition of the sugar tax in Thailand, as the government expects from the tax, many

manufacturers started to reformulate their products in order to avoid the threshold amount of sugar.

However, there is no limitation of reformulation, thus can lead to the excessive use of untaxed substances,

which perhaps have other negative impacts. According to Dr. Ludwig. of the Harvard-affiliated Boston

Children’s Hospital261 , individuals who regularly consume the artificial sweetener may start to be less

259 Low calories juice (30 calories/ 200 ml) 260 The regular price of orange juice is about 49 THB (1.38 euro) per liter while the light one cost 45 THB (1.27 euro) per liter. https://www.tops.co.th/en/malee-navel-orange-1ltr-8853333010626, https://www.tops.co.th/en/malee-light-mandarin-orange-juice-1000ml-8853333015843 261 Stephanie Sacks, What the fork are you eating(2014),

71

sensitive to the sweetness of natural sweet food such as fruits and can result in overconsuming those

foods.262 As a result, there should be some control over the use of substances in the reformulation.

Second, even if there are many manufacturers who started reformulation, others still decide not to

reformulate the products due to the fear of losing consumers from the different taste. This fear can be

explained under principle of consumer sovereignty, which states that when the consumers have the

spending power to choose what to buy, the consumers can influence the outcome of the products.

According to this principle, big companies who might have to burden the larger excise tax thus decide not

to reformulate since they are afraid that nobody would be as interested in the new products as much as

the traditional best-selling products. When there is nothing guarantees the successfulness after the

reformulation, this problem would not be solved. There shall be some subsidy or benefits that attract the

manufacturers to try to reformulate.

5.4 Regressivity

Numerous evidence shows the highly regressive nature of the tax that it is mostly passed through to the

poor. For instance, in Mexico, approximately 67 percent of the sugar tax revenue comes from poor or

lower-income individuals. Or even in Thailand, soft drink is not consumed among low income as in Mexico,

yet it is energy drinks that are more popular. The majority of people who daily drink energy drinks are

laborers or lower-income people, such as construction workers or truck drivers. Imposing tax would only

pass through the price to the consumers who are low income while neglecting the higher income. The

sugar tax has not shown any positive counterbalance of obesity problems. It only poses more price and

decreases the purchasing power of the citizens. In many cases, the fast-food meal with refillable soft drink

is sold at a lower price than the healthier food. Poor families who cannot afford healthier food would be

likely to have more exposure to the unhealthy foods which contains higher calories from sugar and fat at

the lower price. A single regular burger meal with refillable soft drink can contain up to 1200 calories while

the price can be as low as $3-4, which cannot be found in the healthier food. As a result, the target that

this tax would vastly impact is the lower income. Unless the healthier substitutions are made available in,

the more affordable price, the consumption behaviors would not change in a positive way, and obesity

would never reduce.

262 Nonnutritive Sweeteners: Current Use and Health Perspectives(24July 2012)

72

The solution for this challenge could be providing subsidy or rewards from a fraction of revenue for the

healthy alternatives which can substitute the previous unhealthy products or the healthier formulas after

the reformulation. While the tax increases the price of unhealthy foods and beverages, subsidy or rewards

would allow low-income consumers to have incentives to move from the unhealthy foods to the less costly

alternatives. With the lower consumption from the higher price that passes through to the consumers,

the manufacturers will produce healthier alternatives into the market. One study of Ruopeng An263 shows

the effect of subsidies which are applied on the healthy foods such as fruits, vegetables and low-fat snacks

sold in the supermarket, cafeteria, vending machine, market or restaurant from 7 countries including

USA,New Zealand, France, Germany, Netherland, South Africa and UK from 5 electronics data base. The

form of subsidies in the study is discounts and vouchers for healthier foods. After the intervention by the

subsidies to healthier foods, significant numbers of consumers change consumption behaviors by

purchasing and consuming more promoted products. The study suggests that long term effects might be

different from the short one; more studies should be conducted. Nevertheless, the evidence confirms that

subsidies can be the key to changing consumers’ behaviors along with the tax at least in the short term.

Instead of spending all revenue on the medication, it could also be reasonable to change the consumption

behaviors with subsidies that might help to reduce the growth of obesity.

5.5 Political lobbying

According to the rational choice theory and public choice theory, the irrational decision can always happen

from the greed or unstable emotion of human. When humans make a decision, their personal interest will

influence the outcome of decision. The decision always comes out in the most rational way to preserve

personal benefits. Most of the time, personal benefits are varied among individuals and be controversial

to other individuals’ interests. When there are disputes between interests of parties, the regulation or

intervention is expected to be conducted to preserve the welfare and interest of most people in the

society. Nevertheless, since almost all humans have greed, the human institution such as government

institutions are also inevitably greed. The policies which are made by the parliament and bureaucracies

are also come out in the direction which benefits the policymakers. When there is an intervention, even

if such policies are going to promote the public welfare in general, there will be at least one side that loses

the benefits. In order to reduce the loss at the least cost, that side could offer benefits in exchange for the

lower loss of benefits. The benefits can be either monetary or other benefits. Politician usually considers

263 An R. (2013). Effectiveness of subsidies in promoting healthy food purchases and consumption: a review of field experiments. Public health nutrition, 16(7), 1215–1228. doi:10.1017/S1368980012004715

73

policy that makes him get the most vote from people; however, such policy can be flexible to the level

that keeps their vote and generates monetary benefits from the affected side. Quite a few large and highly

influences companies are usually the political party sponsors; thus, many policies would consider the

benefits of the sponsors and result in suboptimal efficiency. The example can be found worldwide for

instance, in the US, many companies whose businesses are relevant to soft drink and juice such as Coca-

cola Co, Wendy, McDonald, PepsiCo or waffle’s house contribute millions to the political parties.264 In

Thailand, one of the board of directors265 from Thai Beverage Ltd, one of the biggest beverage companies

in Thailand joined the political party of the Junta Coup. This can certainly affect the outcome of the policies

regarding the beverages to be lower than the sufficient amount to offset externalities. The revenue, which

is too low, would never work effectively in stopping or reducing obesity. When the intervention of the

government is neither effective nor done for public interest or welfare, such intervention shall not be

claimed rightful to be made. It would certainly be against the right and liberty of life and person under the

constitution and could be challenged and supersede by the constitutions.

The goal of this sugar tax is to reduce consumption of sugar by individuals as well as making manufacturers

reformulate the products but why the government does not impose a tax on the raw material such as

sugar cane, refined sugar or corn syrup sucrose. Besides the high sugar beverages itself, imposing tax on

the raw material, the price of sugar will be higher, and the manufacturer will add less sugar into the

products, and all products will be lower in sugar amount. The reason is perhaps that one of the big sugar

companies is a sponsor of the coup political party who is currently controlling Thailand.266 According to

the public choice theory, the government thus can act not in favor of public welfare and exempt the

section which benefits itself.

Consequently, as long as lobbyist problems are not prevented or mitigated in the best degree, the

intervention could be ineffective to achieve the desired goal and ended up being challenged and repealed

by the constitution. This lobbyist challenge is one of the most difficult problems to get rid of. There is no

default direction for answers or solutions to this problem due to the diversity among countries, but unless

it is solved or relieved, it will constrain the policy from maximal effectiveness.

264 https://www.opensecrets.org/industries/indus.php?ind=n01 265 Wichet Tantiwanit https://voicetv.co.th/read/H1pwwmfqm?fbclid=IwAR3QjiKBOZjHeCRS7wBbq0YpSLgHyBnVCnjHq1i771mathzJ2kVhsvG-ezk (October 3, 2018) 266 Thansettakij, Coup budget is still excessive (21 April 2019), http://www.thansettakij.com/content/399575

74

5.6 Uncontrolled pass-through tax and cartels

The last problem which was found after the imposition of the tax was the unreasonable pass-through

which the consumers are affected. When the government seek to control the consumption of some

certain products by imposing the tax on the certain products, it should also make sure that other untaxed

products do not take advantage and forms cartel that raise the price to all products. The concrete sample

which can be found after the imposition of the tax was the increment of the price of untaxed products

such as Diet drinks, water with flavors, and low sugar beverages. These products are considered to be

substitutes for the consumer who seeks to switch from the regular sugary beverages to healthier options.

Moreover, many brands group together and set the price to be the same for consumers. These gaps thus

cause the consumer to bear the unnecessary cost. The government shall also take this problem into

consideration and try to reduce the number of these by setting the rules or subsidy for the price of these

products.

Chapter 6 Rightfulness of the sugar tax

The sugar tax may be considered as an exercise of police power by the State. In order to be considered as

rightful, the exercise of police power must be in accordance with the law and the criteria it has laid down.

An undue exercise of police power renders the act voidable by the court. Nonetheless, even when such

an act is legal, the concept of rightfulness also needs to consider the appropriateness. Some paternalistic

decisions of the government might be legal but can cause negative impacts on society. This chapter thus

will cover three issues of the sugar tax as follows: 1) sugar tax as an exercise of police power, 2) sugar tax

in relation to the principles of taxation, and 3) paternalism and taxation. The first issue that is needed to

be analyzed is the existence of police power under the Thai constitution or other legislation as well as its

limitation. Governments typically have the power to implement orders for the benefit of its citizens.

However, those orders can only be made to the degree which is not beyond the limitations set by law.

Any order that goes beyond their limitations would result in being arbitrary and should be repealed by

the court. This chapter will discuss the source of police power as well as limitations on such power.

Next, taxation power will be discussed whether it is a part of police power or not and what are the

distinctions. Even assuming that the sugar tax is not an exercise of police power but rather is a legitimate

form of taxation, the second issue will discuss whether such excise tax adheres to well-established tax

principles which are 1) simplicity, 2) equitability, and 3) appropriateness. When these criteria are satisfied,

the tax may be considered as a good and rightful tax.

The third issue challenges the sugar tax based on paternalism grounds. The application of the police power

can be rightful on the ground of the public interest, or the taxation power is made in accordance with tax

principles; however, such paternalistic interference of the state on the free will of its citizens must also be

justified. The issue then arises of how can the state know what is best for its people? What if the costs

of interference outweigh its benefits? How crucial the policy is? These questions also need to be answered

besides the legal aspects.

6.1 Police power and Taxation

6.1.1 Police power

The state has the power to manage and make orders relating to the country’s welfare and business. When

the state makes decisions or orders relating to the public interest, there are usually some impacts to the

76

people which can be either minuscule or significant. In order to prevent the arbitrary and oppressive use

of power as well as minimize the impacts, the ability to make such decision or orders are limited by the

law. Therefore, the state cannot make its order beyond the power given under the law.

Police power is an inherent power of the state, which allows it to regulate or prohibit the certain behavior

of the people in their territory for the improvement of health, safety, morals, and general welfare.267

Generally, any person from any democratic state has the right and liberty to their life and body under the

constitution or other legislation. Any activity which is legal relating to their lives can be done freely, and

those rights and liberties shall not be intervened by the authorities. However, there are some situations

wherein the state has the power to come in and interfere with those rights if there are necessities and

reasons such as better health, safety, morality, and general welfare.

Police power is found varied in scope, exceptions, and limitations among jurisdictions. In the US, police

power derived from the provision of the Tenth Amendment of the US Constitution which states, “The

powers not delegated to the United States by the Constitution, nor prohibited by it to the States, are

reserved to the States respectively, or to the people.”268 It can be interpreted that the power of the federal

government is limited to the degree that is stated under the constitution such as the power to declare

war, collecting taxes, enacting the legislations or to regulate interstate commerce and has to be not

against the state law. Thus, other authorities in different sections such as safety, public health, or welfare

are delegated to the states. The states, therefore, have the power to regulate safety, public health, and

welfare within their own state as they see without the interference of the Federal Government. In the UK,

police power can be found under Article 8 Right to Privacy of the Human Rights Act, “1) everyone has the

right to respect for his private and family life, his home and his correspondence, 2)There shall be no

interference by a public authority with the exercise of this right except such as is in accordance with the

law and is necessary in a democratic society in the interests of national security, public safety or the

economic well-being of the country, for the prevention of disorder or crime, for the protection of health

or morals, or for the protection of the rights and freedoms of others.”269

267 Encyclopedia Britannica, police power, https://www.britannica.com/topic/police-power 268 The Tenth Amendment “The powers not delegated to the United States by the Constitution, nor prohibited by it to the States, are reserved to the States respectively, or to the people.” 269 Article 8: Right to privacy

1. Everyone has the right to respect for his private and family life, his home and his correspondence.

77

In Thailand, police power is found under Section 25 paragraph 1 and Section 26 of the270 Thai Constitution

B.E. 2560 which states,

“Section 25 (1). As regards the rights and liberties of the Thai people, in addition to the rights and

liberties as guaranteed specifically by the provisions of the Constitution, a person shall enjoy the

rights and liberties to perform any act which is not prohibited or restricted by the Constitution or

other laws, and shall be protected by the Constitution, insofar as the exercise of such rights or

liberties does not affect or endanger the security of the State or public order or good morals, and

does not violate the rights or liberties of other persons.”

“Section 26. The enactment of a law resulting in the restriction of rights or liberties of a person

shall be in accordance with the conditions provided by the Constitution. In the case where the

Constitution does not provide the conditions thereon, such law shall not be contrary to the rule

of law, shall not unreasonably impose burden on or restrict the rights or liberties of a person and

shall not affect the human dignity of a person, and the justification and necessity for the

restriction of the rights and liberties shall also be specified.”

Limitations on police power can also differ from very narrow to very broad ones depending on the

jurisdiction. Under the US jurisdiction, the power to regulate the behavior of the people is limited by the

fourteenth amendment at the end of section 1271 as well as in the fifth amendment which works as

safeguards from arbitrary denial of life, liberty or property by the government outside the sanction of

2. There shall be no interference by a public authority with the exercise of this right except such as is in accordance with the law and is necessary in a democratic society in the interests of national security, public safety or the economic well-being of the country, for the prevention of disorder or crime, for the protection of health or morals, or for the protection of the rights and freedoms of others.

270 Section 25. As regards the rights and liberties of the Thai people, in addition to the rights and liberties as guaranteed specifically by the provisions of the Constitution, a person shall enjoy the rights and liberties to perform any act which is not prohibited or restricted by the Constitution or other laws, and shall be protected by the Constitution, insofar as the exercise of such rights or liberties does not affect or endanger the security of the State or public order or good morals, and does not violate the rights or liberties of other persons. 271 The Fourteenth Amendment “All persons born or naturalized in the United States, and subject to the jurisdiction thereof, are citizens of the United States and of the State wherein they reside. No State shall make or enforce any law which shall abridge the privileges or immunities of citizens of the United States; nor shall any State deprive any person of life, liberty, or property, without due process of law; nor deny to any person within its jurisdiction the equal protection of the laws.”

78

law.272 The first part of 14th amendment provides for the due process clause which includes four classes

of protections:1) procedural due process which is a legal doctrine that requires the government to follow

fair procedures before depriving a person of life, liberty or property, 2) substantial due process which is

the doctrine which protects the fundamental rights of the people from government interference even if

procedural protection is not specifically mentioned elsewhere in the US Constitution, 3) a prohibition

against vague law which prohibits the law to be too broad, vague or not understandable for an average

person, and 4) it indicates which portions of the Bill of Rights have been made applicable to the states. On

the other hand, the second part of the 14th amendment is known as equal protection clause which

mandates that the state should apply the same means and methods impartially to all the constituents of

a class so that the law shall operate equally and uniformly upon all persons in similar circumstances. Thus,

the exercise of the police power which destructs oppresses or intervenes in one specific group for the

purpose of racial, religious, political persecution without the proper procedures or legitimate intention is

not rightful and unacceptable. However, it does not mean that the state cannot have its discretion to

determine or shape the orders or regulations. The orders and regulation can be justified on the reasonable

grounds to be not arbitrary.

In Quong v. Kirkendall 273, the court held that “the imposition of a license fee by the Montana Government

does not deny equal protection of the laws from adjusting its revenue laws to favor certain industries. A

state, like the United States, although with more restrictions and to a less degree, may carry out a policy

even if the courts may disagree as to the wisdom thereof. In carrying out its policy, a state may make

discriminations so long as they are not unreasonable or purely arbitrary. This case shows that taxation

power can discriminate as long as it is not purely arbitrary.”

In Great Atlantic and Pacific Tea Co. v. Grosjean274, the legislature of Louisiana adopted an act levying an

occupation or license tax upon chain stores, under which the exaction was fifteen dollars upon each of

two or more stores, not in excess of five; upon each store in excess of five, but not exceeding ten, $25;

and the amount increased in brackets for additional stores, the last bracket embracing stores in excess of

fifty upon each of which the tax was $200. The court held that

272 The Fifteenth Amendment, no one shall be "deprived of life, liberty or property without due process of law." 273 Quong Wing v. Kirkendall, 223 U.S. 59 (1912), https://supreme.justia.com/cases/federal/us/223/59/ 274 Great Atlantic & Pacific Tea Co. v. Grosjean, 301 U.S. 412 (1937), https://supreme.justia.com/cases/federal/us/301/412/

79

“In the exercise of its police power the state may forbid, as inimical to the public welfare, the

prosecution of a particular type of business, or regulate business in such manner as to abate

evils deemed to arise from its pursuit. Whatever a state may forbid or regulate it may permit

upon condition that a fee is paid in return for the privilege, and such a fee may be exacted to

discourage the prosecution of a business or to adjust competitive or economic inequalities.

Taxation may be made the implement of the exercise of the state's police power, and proper

and reasonable discrimination between classes to promote fair competitive conditions and to

equalize economic advantages is therefore lawful.”

"If, in the interest of the people of the state, the legislature deemed it necessary either to mitigate

evils of competition as between single stores and chains or to neutralize disadvantages of small

chains in their competition with larger ones, or to discourage merchandising within the state by

chains grown so large as to become a menace to the general welfare, it was at liberty to regulate

the matter directly or to resort to the type of taxation evidenced by the Act of 1934 as a means

of regulation."

In United States v. Constantine275, the court held that “the federal tax which is imposed on liquor dealers

who violate state liquor laws is unconstitutional on the ground that the intention of the congress seems

to be indeed to punish by enacting the regulation which is a part of the police power rather than taxation

power. The power to punish is beyond the power of the federal government but reserved for the state

itself. Thus, the nature of the tax also indicates whether it falls under the scope of the delegated

constitutional power.”

In some cases, a tax is still constitutional even if it was imposed at the high rate sufficient enough to

destroy the businesses. This is best illustrated in the case of McCray v. the United States276 , wherein the

court sustained the federal excise tax which imposed two cents a pound tax on oleomargarine and other

butter substitutions. The tax was set at a high rate that can destroy legitimate businesses. The court held

that even though the tax might be set so high as to work destruction of the thing taxed, is yet a matter

within legislative and not judicial cognizance. Even if it be admitted for the sake of argument that the

taxing power could not be used arbitrarily to discriminate between like activities or to destroy innocent

275 296 U.S. 287 (1935) 276 157 Sup. Ct. 554 (1937).

80

and legitimate business, the tendency of oleomargarine to look like butter to work as fraud is sufficient

reason to justify the harsh treatment dealt it in the legislation. In another case, the court also stated in

United States v. Kahriger277 that it does not have the power to limit the exercise of the power of the taxing

power besides examining if there is a legitimate rationale for tax imposition. Consequently, imposing the

tax which results in regulating behaviors and consumptions for the interest and welfare of the state as

necessary are constitutional under the US principle.

In Thailand, when rights and liberties are infringed by the enactment of law under the police power, such

persons can bring the lawsuit against such enactment of law.278 Section 25 paragraph 3 of the Thai

Constitution states that “Any person whose rights or liberties protected under the Constitution are

violated, can invoke the provisions of the Constitution to exercise his or her right to bring a lawsuit or to

defend himself or herself in the Court.” Therefore, section 25, paragraph 3 provides for a remedy in case

one is unreasonably oppressed by the state.

There are only a few cases in Thailand regarding the interpretation of the limitation of police power. Of

particular importance is the case of ๔-๒๑/๒๕๕๔279, wherein the court ruled whether the Emergency Decree

on Asset Management Company B.E. 2544 is a valid exercise of police power under the Thai constitution

Having no previous precedents on the subject matter, the constitutional court ruled the case using

general legal principles. The court had to determine whether the limitation of police power was

infringed by the enactment of the regulation, which impacts one party’s dignity, rights, and liberties.

The court held that the restriction was made only to the necessary degree, which minimizes the cost

while keeping the benefits. The law in question gave financial institutions the right to foreclose the

collateral of debt without going through court procedures. The said right covers only the collateral and

targets default debtors who do not pay back after a considerable period of time. By enacting the

emergency decree, financial institutions can avoid endless court processes, thus resulting in efficient debt

management, which is crucial for economic stability and national finance. The enactment was made for

the public interest, not solely for one specific party as well as does not neglect the compensation for

impacts which the affected debtors shall deserve or other prohibitions to the rights and liberties

277 345 U.S. 22 (1953) 278 Section 25 paragraph 3 states that “Any person whose rights or liberties protected under the Constitution are violated, can invoke the provisions of the Constitution to exercise his or her right to bring a lawsuit or to defend himself or herself in the Court.” 279 Constitution Court Case no. 4-21/2011 [panuwud wongcheen translated]

81

under the constitution. As a result, the exercise of the police power through the enactment of the

legislation is rightful and does not go beyond the limitation of the constitution even if it restricts some

rights of the parties.

6.1.2 Exercises of police power

In other jurisdictions, police power has been exercised for zoning, land use, fire and Building Codes,

discrimination, parking, crime, guns, licensing of professionals, liquor, motor vehicles, product selling,

nuisances, schooling, and sanitation or enactment of regulations, among others. On the other hand, there

is nowhere under the constitution of Thailand or previous precedents that specifically mention what area

police power can be applied to; thus, it can work flexibly. This lack of specification as to the scope of

applicability of police power under Thai legislation provides the state an opportunity and justification to

freely regulate. The state has full discretion to decide the exercise of the power as long as it falls under

the condition under section 26 which are (1) is should not be contrary to the rule of law, (2) shall not

unreasonably impose burden on or restrict the rights or liberties of a person, and (3) shall not affect the

human dignity of a person. Justification and necessity for the State’s interference on personal liberties

shall also be specified. These provisions under section 26 are discussed hereunder.

First, the regulation must be not contrary to the rule of law. The rule of law is the principle that states that

the leaders, lawmakers, law enforcement officials, and judges are to be subjected to the law.280 The rule

of law will protect the rights and liberties of the people from unfair and arbitrary leaders and authorities

and prevents the rise of tyrannical leaders and authorities possessing endless power. It consists 7

components:281

1) Balance of power – which states that the power should not be absolutely given to one specific

party to prevent abuse and oppression. There must be the power which balances and monitors

the other power for assuring the rights and liberties are free from oppression;

2) Protection of rights and liberties – which are a part of the human dignity principle which is the

origin of constitutional law.

280 The rule of law, www.constitutionalcourt.or.th/occ_web/ewt_dl_link.php?nid=1283 281 Id.

82

3) Equitability – The court should be neutral without any prejudice or bias mindset in the

judgment. The similar circumstances shall be applied with the same legal method equally.

4) Appropriateness of law—the law, should not be enacted in accordance with the clear and

transparent procedures and shall not be made arbitrarily. It should have the appropriate scope

and should not have retroactive effects.

5) The justice should have discretion without any influences or intervention of the parties, society

as well as the state.

6) When there are no provision states that one action or activity is guilty, there should be no

punishment for such action and

7) The constitution is the highest legislation that cannot be superseded by any other legislation.282

For the sugar tax, the component which is most affected would be equitability. The tax targets only sugar

on beverages while neglecting the other parties such as desserts, café, or bar which also contribute to

obesity. The tax may also be considered as restricting the rights and liberties of the citizens because it

reduces their purchasing power and their ability to buy those products. Therefore, the sugar tax may be

argued to violate the rule of law components, and consequently the first criteria of section 26.

Second, the regulation should not unreasonably impose a burden on or restrict the rights or liberties of a

person. The reasonableness is not explicitly stated anywhere under any Thai legislations, and there are

neither previous precedents from the court. Under section 4 paragraph 2 of Civil and Commercial Code of

Thailand283, when there are gaps in the law which do not have any applicable legislation, the most nearly

applicable provision, in default of such provision and if such default does not exist then the general

principle of law shall be used. Since here does not have any applicable provisions, default of such

provisions or default of such provision thus it is necessary to apply by the general principles of law. The

doctrine of reasonableness could be found in the work of Samuel M. Soref 284 who explained the doctrine

of reasonableness of the police power through the following cases:

282 The rule of law, Thai constitutional court, http://www.constitutionalcourt.or.th/occ_web/ewt_dl_link.php?nid=1283&fbclid=IwAR3gxH_Jp-8ceoaozhbRohWgfPiqtrCFUP-h1AyLa1QQu_tJ_Z-HGrwtgEw 283 Section 4 paragraph 2 “Where no provision is applicable, the case shall be decided by analogy to the provision most nearly applicable, and, in default of such provision, by the general principles of law.” 284 Samuel M. Soref, the Doctrine of Reasonableness in the Police Power, 15 Marq. L. Rev. 3 (1930). : http://scholarship.law.marquette.edu/mulr/vol15/iss1/1

83

• Ex Parte Quarg285- in this case the court held that " police power is broad in its scope, but

it is subject to the just limitation that it extends only to such measures as are reasonable

in their application and which tend in some appreciable degree to promote, protect, or

preserve the public health, morals, or safety, or the general welfare." An examination of

cases dealing with state regulation of polluted water systems discloses the doctrine that

"interference with personal liberty is excusable when reasonably necessary for the

protection of public health, provided the means used and the extent of the interference

is reasonably necessary to accomplish that purpose.”286 It also states that the other

examination of the validity of the police power is the means employed to accomplish

public objects.287 Prohibition or restriction of the activities without any public objects or

necessity thus is not reasonable.

• Tolliver v. Blizzard288 - the court herein held that the police power might not be extended

to the prohibition of the sale of certain harmless drinks merely because certain persons,

under the guise of selling such drinks, may sell intoxicating liquors. The court thought the

ordinance unreasonable, and therefore void.

• Ruhstrat v. People289 - held that the state police power does not include the power to

prohibit the use of the national flag or emblem for advertising purposes. The "flag law,"

the court thought, was a harmless creature that tended in no way to safeguard the

interests of society. It was also declared that the use of the flag for advertising purposes

had "received the unqualified approval of the whole commercial world." Hence the

complainant, who was engaged in the wholesale and retail cigar business, was permitted

to use the likeness of the flag as a label or trademark. Thus, when there is no harmfulness

of such activities, the restriction or prohibition is not reasonable.

Based on these cases, reasonableness is justified by the necessity and reasonable grounds regarding the

protection of public health, morals, safety, or general welfare. When the intention of restriction lacks

those factors, it shall be considered unreasonable.

285 149 Cal. 79 286 23 L.R.A. (n.s.) 766. 287 Samuel M. Soref, the Doctrine of Reasonableness in the Police Power, 15 Marq. L. Rev. 3 (1930). : http://scholarship.law.marquette.edu/mulr/vol15/iss1/1 288 143 Ky. 773, 137 S. W. 509 289 185 Ill. 133.

84

The most obvious consequence of the sugar tax is the noticeable change in the price of sugary beverages

by about 10 percent while some the price of concentrated syrup increased by nearly 30 percent.290 The

changes in price have no standards and cause the gap which the sellers can take advantage of bypassing

unreasonable extra price. The price increased in the rate ranging from 10-30 percent depending on the

amount of sugar in each product. On 1st August 2019, the second phase of the rate adjustment was

implemented, resulting in an increase in the price of sugary beverages by 20 percent. This may be argued

as imposing an unreasonable burden to the majority of the people, especially the low-income individuals

whose purchase power is already lower than others. The consumption per capita was decreased by 0.2

liters per year after the imposition of the tax291 as expected, especially on the products where the price

increased at a higher rate showing that the right to consume sugary beverages of the people was affected

though not to the full extent. Nevertheless, the prices of many sugary beverages are still in the affordable

range. While the daily minimum wage in Thailand is 300 THB (10 USD) per day, the price of soft drink is

about 12 THB (0.40 USD or 4 percent of daily minimum wage) per can, while energy drinks which are

popular among labors or night shift workers are about 10 THB (0.33 USD or 3.3 percent of daily minimum

wage). Moreover, the revenue that came from the tax was 2-3 Billion THB which is much lower than the

initially planned 600 billion THB since the rates were set low in order to allow the manufacturers to reform

their production processes. The tax restricted the rights and liberties of the people by increasing the prices

of sugary beverages, yet the restriction was made at a very low degree, which barely affects the

purchasing power of the people. The purpose of this tax was for improving public health thus it has

sufficient reasonable ground and is considered legitimate according to Case no. 4-21/2011. There, in order

to consider one circumstance to be reasonable, the indicator is whether it is done at the appropriate

degree as necessary with the legitimate grounds. The sugar tax was made at a low but appropriate rate

to effectively discourage the consumption of sugary beverages so as to achieve the goal of improving the

health of the citizens. Though sugar is not the only cause of obesity, it is certainly one of the main factors

that cause it. Even if the regulation shows limited effectiveness, it was done at a reasonable degree with

legitimate grounds.

Third, it shall not affect the human dignity of a person. Human dignity is not a legal term whereas is rather

a principle. It is defined differently depends on the institution, yet having the same concept of equal

protection and treatment of any humans. In the constitutional court publication by Dr. Surachai

290 Soft drink price-raise by 2-3 baht, July 22,2019, https://www.sanook.com/money/676877/ 291 https://www.statista.com/outlook/20020000/126/soft-drinks/thailand#market-revenue

85

Srisarakham292 defines human dignity as “a natural personal right and value that existed from the birth

time of all humans which is supreme, equal regardless conditions and shall be protected by the law and

the state.” Thus, any kind of action which results in devaluing the dignity of the human breach this part of

section 26.

One of the works from Thailaw.com suggested that human dignity is breached when293

1) the state power treats humans as object or property,

2) the treatments cause the abilities of humans to be lost,

3) there is disrespect towards values that are worthy of that human being as a person

4) there is a destruction of reputation

5) there is discrimination and abuse

6) an inappropriate judgment is given

7) criminal punishment is too brutal

8) the rights and freedoms set forth in the Constitution are voided and undermined or prevented

from being exercised

When the act of the state falls under one of these situations, it breaches the third component of section

26. Sugar tax puts the burden on the people and indirectly prohibits them. Though the impact of the tax

is felt more by the poor compared with richer social classes, unintended discrimination does not violate

the dignity of the poor people. It may even be argued that the tax promotes the dignity of these people

by helping them make better food choices to achieve better health.

Lastly, the justification and necessity for the exercise of police power shall be specified. In order for the

law to be justified, the act must have sufficient ground such as necessity to the people. When there is

necessity, the court could affirm that the police power is legitimate as in case no. 4-21/2554 294 discussed

previously.

292 Human rights and human dignity, http://www.constitutionalcourt.or.th/occ_web/ewt_dl_link.php?nid=1394

[Panuwud translated] 293 Human rights and dignity breach, http://www.thailaws.com/aboutthailaw/general_33.htm?fbclid=IwAR2J7aOmtnMCHTBko9aD01DBUnxxEvK01U9Qe6hjsOUPYJH3gL7zgXPAEFw 294 [Constitutional Court of Thailand], No 4-21/2554, 8 March 2011 (Panuwud Wongcheen Translation)

86

The excessive sugar consumption of Thai people provides sufficient necessity and justification for the

sugar tax. According to an article from Thai business news 295, the daily average consumption of sugar

among Thai people is approximately 104 grams per day, which is more than 4 times the recommended

amount. Furthermore, the article mentioned that based on a survey conducted by Dr. Sutha

Jiaramaneechotechai, deputy director of the Health Department, most Thais get their sugar from

beverages such as soft drinks (9 teaspoons per serving), green tea (13 teaspoons), coffee (10

teaspoons),.296 The article also stated that 40 grams of sugar is hidden in so many beverages which Thai

people can access.

When sugary beverages consumption is excessive, as in the case of Thailand, individuals become obese

and suffer from chronic diseases such as diabetes, heart diseases, and high blood pressure or joint

damages which cost approximately 12,000 million THB per year. The medication costs are covered from

the tax which is paid by the other citizens. In Thailand, all of the citizens can enjoy the medication service

by 30-baht scheme which provides universal coverage for illnesses with a flat consultation rate of 30 baht

(about 1 dollar) for any citizen. The increase in diseases also results in doctors, nurses, and other hospital

staff getting extra work, which can be as much as 32 hours of additional work in some cases. These

circumstances necessitate the intervention of the State in the rights and liberties of the people in order

to maintain their health.

However, obesity does not impact the majority of people. Overweight people represent approximately 32

percent of the Thai population, and of these, 8.5 percent are considered obese. The increased prices of

sugary beverages from the imposition of the tax could be unfair to the remaining 68 percent of the

population who contribute no externalities. It is also true that sugar from beverages represents significant

amount of daily sugar intake, yet the determination of obesity is not only sugar. When the calories in

surpasses the daily needs calories, the person would be obese even if sugar is not highly consumed. While

40 grams of sugar is 160 calories, which is only 8 percent for the one who consumes 2000 calories a day,

a bag of chips or fried food can be nearly 1000 calories. For instance, 11 chips of Doritos can be 140 calories

which are nearly the same as the calories of one can of soft drink297 or the fancy Starbuck coffees can be

up to 500 calories per glass which is 3 times more than the regular soft drinks. Even if the tax is imposed

295 Olivier Languepin, Thailand’s dangerous sugar addiction (5 November 2015) 296 Id. 297 Doritos label, http://www.jemome.com/p-doritos-food-label-193184/

87

on all beverages, people can still add sugar to their food or beverages. Moreover, the factors which

contribute to obesity, diabetes, and high blood pressure are not only sugar. Other nutrition or genetic also

influent the chance of obesity.

Though there is some evidence showing that the tax results in a decrease of sugar consumption from the

beverages, there is still no evidence supporting positive change of obesity rates after the implementation

of such a tax from any of countries in this study including Mexico, Hungary, and Norway. Perhaps mindful

of this trend, Mr. Kasit Pirom298, a member of National Reform Council of Thailand, suggested that it might

be more reasonable to make the people realize the dangers and externalities of these beverages as well

as the appropriate amount of consumption instead of imposing the tax which imposes unreasonable

burden on the people. Mr. Kurujit Nakontup299, another member of the council, added that the imposition

of the tax on sugary beverages as alcohol or tobacco would be against the feelings of majority of the

people. However, the 2 dissents were not enough to be against 153 affirmative votes for the passage of

the sugar tax. Although evidence shows the ineffectiveness of reducing obesity outcome, that does not

change the fact that there is a legitimate ground that sugar which contributes obesity and needs some

intervention. Therefore, the necessity might be sufficient based on the aforementioned reasons. And

when the necessity requirement is met, and the government shall have the power to enact the legislation

to respond to the problem. Therefore, police power can be applied for sugary beverages without

breaching section 26.

The tax can be argued as non-compliant with all criteria under section 26 paragraph 1 because it is

inequitable and unduly discriminates against sugary beverages while ignoring the other contributions of

obesity. Nonetheless, the tax is necessary to curb the excessive sugar consumption of Thai people, which

results in increased rates of obesity and other related chronic diseases. This necessity is sufficient

justification for the classification and regulation of sugary beverages. Moreover, until and unless the court

rules that a there is not sufficient justification for the implementation of the tax, the state’s act of

interfering with the rights of the people, in this case, would be presumed to be constitutional.

Furthermore, the police power of the state can also be enforced by the executive power besides the

legislative power. Instead of enacting legislations, it can be enforced as a form of emergency decree.

298 https://www.hfocus.org/content/2016/04/12080 299 Id.

88

Under section 172 of the constitution of Thailand,300 an emergency decree can be issued by the King on

the grounds for maintaining national or public safety or national economic or security or averting public

calamity. The issuance can be made with the opinion and agreement from Ministers that the current

situation is urgent, necessary, and unavoidable.301 The law can be immediately enacted without any

limitations or restrictions if the executive sees necessity which can be arbitrary and biased in some cases.

For instance, in 2014 when the coup successfully made junta coup and gained power, an emergency

decree was issued, which puts a curfew on time residents can leave their houses. In a more recent

example, an emergency decree was issued for the regulation of digital assets. This emergency decree

BE.2561 was made on the ground of the necessity of the systematic and organized monitoring and

management of digital assets and digital business and for the improvement of transparency for investors.

The decree mandated businesses to sell their digital assets only through the government portal and also

imposed license, annual and business fees302 on business owners. Startup companies were also restricted

from Initial Coin Offerings (ICO) unless they acted in compliance with the emergency decree. ICO is

commonly used to raise funds for startups because of its affordable cost and ease of administration, yet

decree made ICOs as expensive and cumbersome as an Initial Public Offering (IPO). The people who make

profit in the investment were also imposed 15 percent tax from their net profit. Advertising and all

relevant activities were heavily restricted. Clearly, this emergency decree impacts life and liberties of the

people and the business owners, yet it can still be made when there are some reasonable grounds. When

the reasonableness was found invalid, the constitutional court can cease such emergency decree before,

during, and after the enactment.

6.2 Taxation and its limitation

6.2.1 Taxation power and its limitation

Police power and taxation are two of the inherent powers of the state. In the previous section, it was

argued that the sugar tax, though a tax in form, is actually an exercise of police power by the state since

300 For the purpose of maintaining national or public safety or national economic security, or averting public calamity, the King may issue an Emergency Decree which shall have force as an Act. 301 Section 172 paragraph 2 “The issuance of an Emergency Decree under paragraph one shall be made only when the Council of Ministers is of the opinion that it is an emergency of necessity and urgency which is unavoidable.” 302 Baker McKenzie, A Complete Guide to Regulations on Cryptocurrencies and ICOs in Thailand “2.5 million THB for operating cryptocurrencies and 2.5 million THB for operating Digital Token Exchanges, Annual fee: 0.002percent of the trading value in the range of 0.5 million- 20 million THB and license fee for 30,000 THB.”

89

it regulates the rights and liberties of the people in order to promote the general welfare. In this section,

the analysis moves further and assumes that the sugar tax is an exercise of the taxation power of the state

and analyzes the rightfulness of such a charge using generally accepted taxation principles.

Taxation is defined as the power of government to raise its revenue by imposing charges on income or

property from residents or subjects for the purpose of sustaining the state facilities and activities,

distribute resources. There are 2 types of tax which are a direct and indirect tax. The authority to impose

direct tax is given to the department of revenue and the indirect one to the excise department. This part

will merely focus on excise tax, which is indirect tax. Indirect tax is usually used as a device for discouraging

people from consuming what the state sees harmful and causes externalities. It can also be used for

subsidizing what the state sees beneficial and deserved subsidies. Tax imposition would impact the price

of the products or activities and indirectly discourage the people from those activities or products. Unlike

police power, which has numerous restrictions, taxation power usually has fewer restrictions due to the

nature of less degree of restrictions to rights and liberties. It would require fewer requirements to be

satisfied and less complicated when the government changes the price of products instead of directly

control individuals’ rights and liberties. Perhaps, as long as such tax is not fully arbitrary and imposes

unreasonable or unrealistic level of burden to the people, there are no restrictions under any Thai

legislations. The taxation principle is thus the only principle that can be used for justifying whether such

tax is rightful.

6.2.2 Legality of Sugar Tax

Unlike police power, there are no stringent restrictions for taxation power. This revenue-raising power

sometimes can be said as having almost no legal limitation under Thai jurisdiction even if it causes some

restriction or disadvantage to some specific parties. The limitation depends on the discretion of the Excise

Department or Department of Revenue.303 For instance, generally, the interest rate which is below 20,000

THB is not subjected to the tax under Thai law. However, in April 2019, the Thai government attempted

to impose a 15 percent tax on the interest income of bank accounts in the excise tax department order

no.344. This order forces bank depositors to give consent to disclose all bank transactions and to be

monitored by the regulators. Individuals who do not give such consent shall be immediately imposed a

303 Section 6 Excise tax Act B.E.2560

90

tax on their interest income even if the amount is lower than the threshold under the law. Banks were

also forced to give any of the customers’ information to the revenue department. The Excise departments

claim that the purpose of such tax is to promote transparency of transactions and reduce tax evasions.

Over 80 million accounts or 99 percent of people were potentially affected by this proposition. However,

the order was modified in the Excise tax Department order no.347 which still impose 15 percent tax on

the interest rate below 20,000 THB for the one who does not give consent of disclosing information but

can be redeemed at the end of the year in the fiscal filing.304 The one whose interest income of bank

account exceeds 2000 THB has to pay tax regardless the consent. The cause of change of order was only

because of the revenue department's discretion. The revenue department can still impose this tax when

it sees necessary. Unlike the police power, which components under section 26 must be all satisfied to be

made, taxation power fully depends on the discretion of the revenue department.

Taxation is justified if is in accordance with Excise taxation principle. According to the principle of excise

tax, simplicity, equitability, and appropriateness must be taken into an account. The current tax that is

enforced in Thailand is simple enough to meet the simplicity component from the clearly defined simple

rate and scope however equitability and appropriateness are still questionable. The scope of the health-

related tax narrowly targets some products and exempts other products which deteriorate health such as

fat or other types of simple carbohydrate. Products such as sugary coffees with cream, fruit-flavored beer

or wine or ready-to-drink products that contain higher calories than a tiny bottle of a taxed energy drink

are exempted from the sugar tax. This unequal treatment might be considered inequitable following the

tax principles. Here, the same tax is not applied equally to all externalities, which cause obesity. In fact,

fatty food such as chips can contain much higher calories, which can go nearly 1000 calories for a 200

grams bag. Thus, at the same price, one bag of chips can contribute more excessive calorie intake than

sugary beverages. Stir fried, and deep-fried food are also consumed daily by Thai people. This food

contains about 400-800 calories per serving.305 Neither is the tax equitable in terms of the people affected

because the tax is imposed on every individual regardless of their health condition. Sugar can cause

obesity and diseases only when it is excessively consumed by non-obese people. As stated earlier, about

68 percent of the Thai population are neither overweight nor obese; thus, this tax will put an unnecessary

burden on the individuals whose consumptions creates little to no negative externalities.

304 Thai Banks to tax savings interest above 20,000 THB, National News Bureau of Thailand (24 April 2019) 305 Calories in Thai food (11 March 2013), https://health.kapook.com/view58233.html

91

The appropriateness of the tax is also not satisfied, particularly in designating the rate. Most interventions

are hardly made at the most efficient degree due to the difficult administrative processes and the vested

political interests.306A well-designed tax rate shall be set at the level which is able to internalize

externalities at the least cost to the society. However, the factors causing obesity are more complex than

just sugary beverages. Thus the imposition of the tax on sugary beverages alone is not fully appropriate

to internalize negative costs. This inaccuracy would result in damaging the industry as well as the citizens

while showing insignificant effectiveness. Here, the rate was set at a low level due to industry concerns as

well as the severity of regressivity to the people. This rate, which is about 3-4 percent of the daily minimum

wage in Thailand and about 0.1 percent of the daily average salary of people in Bangkok is perhaps too

low to discourage people from consuming sugary beverages. It is also highly arguable if tax is the most

appropriate method to combat obesity. As discussed in previous chapters, obesity is caused by a multitude

of factors. Therefore, relying on tax alone is an inappropriate response to the growing obesity problem.

Other methods such as making healthy food more affordable for the poor, incentivize manufacturers for

the reformulation by special tax rates or organizing sport or dancing events at the local level which people

can be more physically active and change the mindset about exercising.

6.3 Paternalism and taxation

Even if the legality of tax is accepted by the court, the rightfulness of the tax may be questioned based on

paternalistic grounds. For instance, what are the differences between public interests and paternalism?

How can the state know what works best for majority of people? Do paternalistic actions make people

decide better than when they are allowed decide based on beliefs or personal preferences? Or how to

balance between freedom of choice and paternalisms? This part will answer these following issues.

The first part that should be covered here is the concept of paternalism and its arguments. In a democratic

state, the freedom of choice allows individuals to be boundless in deciding their economic activities.

Individuals shall be free to engage in any consumption which they find beneficial or serve their

preferences. The supply and demand would function perfectly and reach the equilibrium without any

requirements of intervention from the government. However, it is not always perfect like in theory

306 Jonathan S. Masur; Eric A. Posner, Toward a Pigouvian State, 164 U. Pa. L. Rev. 93 (2015)

92

because some consumption can pose negative impacts on society. For instance, over consumption of oil

and gas would emit excessive amount of gas as a result and impact society or the excessive consumption

of food can cause diseases that put burden on government and ministry of health. The idea of controlling

or limiting person’s liberty or autonomy for their own good is at the heart of paternalism. 307 In simple

words, the government acts as a benign parent.308 The restricted activities can be the choice of many

types of consumption, such as nutrition, clothes, shelter, or other daily life consumption. The restrictions

can also be varied from extreme to relaxing one, which only sets the default option that allows people to

opt-out. Like parents’ decisions, those decisions might not be the best decision for everyone.

Many studies were conducted by comparing the different outcomes when the state intervenes in the

choices of people versus allowing the individuals to make their decision themselves. An example would

be a mandatory vaccination program that is effective in preventing diseases and disorders in newborn

babies. When the vaccination rate declines, people start to see a resurgence of diseases. Countries that

mandate vaccination has much lower diseases than those that leave it to the choice of the parents. In the

US, vaccination is not mandatory in most states. And as predicted, measles was found widespread in

Washington State again in January 2019 after the declaration in 2000 that the US was measles free. This

disease is preventable by vaccination, which was implemented in many countries and almost disappeared

from those countries.309 Another study in Mexico310 compared the choice of consumption of a poor

community between receiving cash versus receiving a set basket food to choose from. The result showed

similar outcomes between the adults who receive food and another who receives cash while showing

some differences between the children in choices and nutritional intake. However, the conditions such as

personal expenses, priority of nutrition, life condition, or education level can play a significant role herein.

When these conditions of both sides are not controlled, it cannot be concluded the irrationality. On the

other hand, in the scenario which these factors are controlled and the one who receive cash still make

less optimal decision, it can be concluded that the intervention makes people decide more rationally. This

could be the ground for intervention since people act sometimes.

307 Dworkin, Gerald, "Paternalism", The Stanford Encyclopedia of Philosophy (Summer 2010 Edition), 308 Matthew Thomas and Luke Buckmaster, Paternalism in social policy when is it justifiable? (15 December 2019) 309 Resergence of measles in the US, https://www.hfocus.org/content/2019/02/16798?fbclid=IwAR15r31kWwnf6E7zpiOATPIPB-E2Kj1wTOzvmmqqQryYuqbLfECeSRfLGl0 310 Cunha, Jesse M. (1 April 2014). "Testing Paternalism: Cash versus In-Kind Transfers". American Economic Journal: Applied Economics. 6 (2): 195–230

93

The concern about the obesity problem was raised from the statistics that show the rise of obesity in

Thailand during the last 2 decades and the costs attached to such a condition311; however it has not

precisely concluded what factor contributes most to the rise of obesity. Overconsumption of any nutrition

can cause obesity from the unused extra caloric intake. Another study showed that the daily consumption

of sugar among Thai people was 4 times higher than the recommended amount thus sugar has been

accused of being one of the primary reasons for obesity and requires some corrective policy. Thai people

know about the causes of obesity from their Physical Education classes yet find it as a personal issue rather

than a public one which costs the government millions each year. The state believes that its decision is

necessary and would be more beneficial and superior to the individual decisions of people. As a result,

the state imposed a sugar tax on almost all kinds of sugary beverages to discourage individuals from

consuming less of the taxed products.

Nevertheless, the state can also make suboptimal decisions. Failure is evidenced in interventions like Ride-

sharing Regulations, which results in banning all ride-sharing companies in some areas.312 Ride-sharing

was made in response to the affordability and transparency problems in traditional taxi companies. The

ban resulted in the unnecessary monetary burden for the poor who have less purchasing power. Students

and other part-time drivers were also affected by job loss. Other people also bore more costs while

receiving fewer options that have similar qualities. If the people are freely allowed to have choice, many

of their decisions might not be traditional taxicabs.

There might not be the absolute answer for which one is a better option or how the state can know better

than its people. Individuals have been shown to be prone to make irrational decisions while the state has

not been infallible and has committed its own share of mistakes. Balancing between public interest and

private interest is crucial. Perhaps, the best answer is neither non-restrictive control nor absolute freedom

but rather the default control which allows people to decide to opt-out. The state might select one default

decision, which it sees as a good choice in a loose binding way. In this way, the state can control behaviors

while respecting the freedom of choice of the people. The sugar tax can be seen in this light – it provides

a default regime of a more expensive sugar beverage market which nudges people to opt-out in

311 Yot Teerawattananon and Alia Luz, OBESITY IN THAILAND AND ITS ECONOMIC COST ESTIMATION (March 2017) 312 8 Big-Government Policies That Hurt the Poor, Patrick Tyrrell “Such as outside Portland, Oregon; Alaska; and Austin, Texas.”

94

consuming these beverages. The tax does not strictly push people away from purchasing sugary beverages

but softly discourages while still allowing the people to make the final choice.

95

Conclusion

Generally, in the free market, individuals shall be entitled to the right to allocate and consume as he

desires or sees available to him. This freedom shall not be intervened or limited by any power or parties

so long as there are no negative impacts on the society. In reality, it is inevitable to make all consumptions

free of negative impacts when the consumptions exceed the efficient quantity. When this inefficiency

occurs, the resources would not be maximally allocated and pose negative costs to society. In order to

reallocate the resource to the equilibrium point, intervention is suggested to be conducted under

Pigouvian theory. In this theory, the intervention must be designated and conducted to the point that

offset cost of externalities. The intervention could be made through tax to control consumption regarding

rule of supply and demand.

Obesity was one of the most attentive global concerns which got attention from institutions and

organizations. It raises the unnecessary cost to the society and state while can be prevented; thus it is an

externality in the market. As aforementioned, one experiment313 showed that people could act less

optimally following their personal preferences thus in order to maximize the efficiency of consumption,

the government might need to intervene in the consumption behaviors.

In the legal aspect, there was a question that challenged the legality of intervention regarding the right

and liberty of life under the constitution. Other legislation which gives the power of taxation is the excise

tax Act shall also be complied with if the order is made under this law. For the police power, only the

specific circumstances which have justification that the state can intervene and still be rightful. Taxation

is another power that is possessed as a sovereignty of the state. It has different criteria from the police

power, which can be applied to restrict right and liberty of the people. Unlike police power, taxation does

not always fully restrict rights or liberties of the people. It might create the incentive of the people to

behave in the way that the government plans for. It, therefore, does not have restrictions as strict as

police power. In this case, improving health conditions of the citizen if the duty of the state under section

55 and 71 paragraph 2 of Constitution of Kingdom of Thailand B.E.2560.

313 Cunha, Jesse M. (1 April 2014). "Testing Paternalism: Cash versus In-Kind Transfers". American Economic Journal: Applied Economics. 6 (2): 195–230

96

However, this duty does not allow it to restrict all behaviors by exceeding its power under section 26.

Therefore, if the state plans to implement the restrictions for improving health conditions, it still needs

legitimate reasons such as necessity of restriction and specifies such reasons. Many sugary beverages

possess no nutritional value and only give excess calories, which leads to obesity. Thus the state should

perhaps need to intervene in the consumption to prevent the excessive consumption of the people which

could be done with some mechanism to discourage the demand or the consumption. Many evidence

support that sugar is one of the factors that cause obesity but not only one. Therefore, this could be the

legitimate ground of the intervention by the state even if the intervention has shown to decrease sugar

consumption from beverages yet has shown little effects on the obesity or even if Job losses and other

negative impacts have been supported by some studies.

Taxation does not have the same criteria as police power is more flexible and less complicated for

imposing the tax. It requires no legitimate grounds yet should still be complied with the excise tax principle

to be rightful. The compliance has no binding effects to the legality but the rightfulness. The components

are 1) simplicity 2) equitability and 3) appropriateness. Among these requirements, only simplicity might

be satisfied. Imposing the tax to everyone might not be fair to some who are far from obesity and consume

very little for leisure, but it still benefits the overall society. The intervention here is done by imposing a

low tax rate that has little effect on the consumers casting doubts as to the achievement of the law’s

ultimate goal. Nevertheless, not only sugar causes obesity but also other factors such as fat or

carbohydrates, which are overconsumed. When the state does not target all causes of externalities

equally but specifically target sugar from beverages, it means that this tax does not meet equitability and

therefore probably not rightful.

Obesity itself does not cause death; however, it could pose more chances to many diseases that could be

life-threatened. Governments worldwide thus started introducing tax on sugary beverages. The desired

goal herein is to halt or stop obesity growth within the territory; different methods of taxes are thus

imposed on sugary beverages or desserts depending on jurisdictions. Hungary and Mexico are one of the

first countries in the world who attempted to reduce and stop obesity through the reduction of sugar

from beverages — following with many other countries in Europe, South Africa, and Asia.314 Almost every

314 Sugar taxes around the world, https://www.abc.net.au/news/2018-01-07/sugar-taxes-around-the-world/9309516 Currently there are 28 countries that have imposed tax on sugary beverages which are Mexico, Norway, Hungary, France, the UK, Thailand, Ireland, The Philippines, Singapore, South Africa, UAE, Cook Island, Kiribati, French

97

jurisdiction which poses tax on sugary beverages found reduced sugar consumption. The amount of sugary

beverage consumption was shown to decrease by up to 12percent or more. However, after years of the

promulgation, there is neither sign of successfulness of consumption in the long term or obesity reduction.

The consumption in Mexico and Hungary only temporarily dropped down and started to grow up after

few years of the tax. The obesity growth rate temporarily stopped in a very short period and grew up

higher than before the promulgation of the tax. The reason that these interventions fail was due to the

inaccuracy of the tax policy. In order to counterbalance the externalities, cost of externalities must be

precisely and completely designated. The reasons that make Thai government fail to achieve the obesity

reduction goal can be,

First, it ignores scientific evidence and targets the small fraction of the calorie intake. The primary cause

of obesity is thus not only sugar beverages but also the excessive consumption from other sources. It thus

should address all factors that are involved in the externalities. After adding all factors involved and causes

of the externalities, the rate can be set. If the rate is set is too low to convince people to consume less in

the targeted products, it will not change or pose any impacts. However, too high rate also provides

adverse impacts. It would fully restrict the rights and liberties as well as giving regressivity to the poor and

perhaps make worse externalities from the individuals who consume less healthy food for the favored

unhealthy beverages in their personal preferences. Since cost of externalities is much higher than the

current revenue, the government might need to find some method of raising more revenue without

making the tax too high. Broadening the scope might help. With the broader scope, the tax rate will not

have to be tremendously high, while the revenue could be increased. However, in practice, lobbying will

make some products get exempted or lower rate of tax imposition as well as the higher administrative

cost. It still has many challenges to solve before executing.

Second, what is missing here and lead to this market failure is the information and accessibility of the

substitutes. Tax policy can be the assisting mechanism, yet it will very difficult to solve the obesity problem

sustainably alone. In order to make this problem solved in a sustainable way, consumption habits must

be changed. Education or information can be provided to consumers to allow them to decide to change

their consumption behaviors. The consumers who are acknowledged about the impacts of

overconsumption but still keep their behaviors unchanged could have other problems such as personal

Polynesia, Chile, Dominica, Barbados, Portugal, Spain(Catalonia), Belgium, Finland, Estonia, St Helena, Saudi Arabia, 7 cities in the US, Mauritius, Seychelles, Brunei, Nauru, Fiji, Samoa and Tonga.

98

preference, inability to afford the healthier options or lack accessibility of healthy substitutes. When the

accessibility of the healthier options and the price are made to be convenient with more affordable prices

along with raising the price of unhealthy food, the consumers might swap to the healthier options as

mentioned in price elasticity of demand theory. The more ability to afford substitutes, the more sensitive

the price change in the old products. Since humans can act irrationally based on their personal preference,

the consumers who still decide to consume and risk causing externalities to the society shall incur such

cost through tax. The revenue also should not be wholly used for medication. Instead of focusing on raising

revenue for medication purposes solely, the revenue can also reduce the new coming externalities by

changing consumption permanently. The revenue from tax could be spent to subsidize healthier options

to be more affordable. When the price of healthier foods is lower, the consumer would have incentives

choose healthy food or beverages more than when their price is higher.

Lastly, obesity is preventable, but it takes a long period to resolve. Some governments have already

repealed and given up from the temporary results. There could be job losses, revenue falls, or other

temporary effects, but most of the time for public policies, society would pay some cost at the beginning

and benefit from the policy later.315 For instance, after the implementation of the Clean Air Act316 or the

Super Fund Act317 which raises up the cost for industries to comply with the more stringent standards

under the regulation, there were also concerns about job losses due to the more stringent standard or

other negative impacts. However, after the reasonably long period, air quality and toxic substances are

removed and turned into the better way around the US.318 So will obesity, the reasonable amount of time

must be given as well as the improvement of the strategies. For now, the effectiveness of sugar tax might

not be noticeable. However, with the complementary work of tax, information provided as well as

subsidies, there would certainly be a positive change in the long term, and the obesity reduction goal

would finally be achieved.

315 Javier Rivas, Subsidies for healthy foods are a price worth paying to tackle obesity (March 2017), http://theconversation.com/subsidies-for-healthy-foods-are-a-price-worth-paying-to-tackle-obesity-74726 316 Clean Air act is the regulation in the US which was implemented to reduce the pollution and improve air quality in the US. The stringent standard of it made many industries to install new devices or filters to avoid the lawsuits. 317 Superfund Act is a regulation which was implemented in order to encourage the industries to be aware of their toxic substances waste with the extremely high cleaning cost for discharging the toxic substances. 318 Clean Air Act Overview, https://www.epa.gov/clean-air-act-overview/progress-cleaning-air-and-improving-peoples-health#pollution

99

Bibliography

Literature

Abel Grünfeld, Price elasticity of demand for soft drinks in the Netherlands (June2017) Adela Hruby, Ph.D., MPH and Frank B. Hu, MD, Ph.D., MPH (2016), the epidemiology of obesity: A big picture, https://www.ncbi.nlm.nih.gov/pmc/articles/PMC4859313/ A.C. Pigou, M.A. professor of political economy in the University of Cambridge (1932), The economics of welfare, chapter 9 paragraph 1 P. 172, chapter 12 p.531 Alda, Filip. A Better Kind of Violence: The Chicago School of Political Economy, Public Choice, and the Quest for an Ultimate Theory of Power (2016) An R. (2013). Effectiveness of subsidies in promoting healthy food purchases and consumption: a review of field experiments. Public health nutrition, 16(7), 1215–1228. doi: 10.1017/S1368980012004715 Arturo Aguilar, E. G. (2015). Taxing Calories in Mexico. Center for Economic Research of the Autonomous

Technological Institute of Mexico (ITAM).

Bell, S.J., Sears, B., “Low-glycemic-load diets: impact on obesity and chronic diseases.” Critical Reviews in Food Science & Nutrition, 43(4), 2003, pages 357-77. Ben cliff and Cornelia Wall, Economics patriotism in open economics (2013), Retrieved from https://www.degruyter.com/view/j/ael.2014.4.issue-1/ael-2013-0037/ael-2013-0037.xml Berardi, Nicoletta, and Sevestre, Patrick and Tepaut, Marine and Vigneron, Alexandre, the Impact of a 'Soda Tax' on Prices: Evidence from French Micro Data (December 2012). Bird, Richard Miller, Tobacco and Alcohol Excise Taxes for Improving Public Health and Revenue Outcomes: Marrying Sin and Virtue? (November 23, 2015). World Bank Policy Research Working Paper No. 7500, https://ssrn.com/abstract=2695230 Borenstein M, Hedges L, Higgins J, Rothstein H. Comprehensive Meta-Analysis, version 2.0. Englewood, NJ: Biostat, Inc.; 2008. Brownell, Kelly D.; Farley, Thomas; Willett, Walter C.; Popkin, Barry M.; Chaloupka, Frank J.; Thompson, Buck, J. (2008, December 5). economic Blogspot. Retrieved from econperspectives: http://econperspectives.blogspot.com/2008/12/efficiency-of-tax-system-overview.html1 Cunha, Jesse M. (1 April 2014). "Testing Paternalism: Cash versus In-Kind Transfers." American Economic Journal: Applied Economics. 6 (2): 195–230 Determinants of Price Elasticity of Demand | Goods - Economics." http:// www.economicsdiscussion.net/price-elasticity-of-demand/determinants-of-pr. 19 May. 2019


100

DiMegglio DP,Liquid versus solid carbohydrate: effects on food intake and body weight(2000), https://www.ncbi.nlm.nih.gov/pubmed/10878689

Dworkin, Gerald, "Paternalism," the Stanford Encyclopedia of Philosophy (summer 2010 Edition),

Donald Marron, M. G. (2015). Director of economic policy initiatives and Institute fellow at the Urban

Institute. Washington DC.

F. Xavier Pi-Sunyer. obesity criteria and classification(2000) p.505-509 Frank, Robert. Microeconomics and Behavior (7th Ed.). McGraw-Hill. P.119 (2008) Gardner C., nonnutritive Sweeteners: Current Use and Health Perspectives (24July 2012) Geert Thijssen. The failure of pigovian tax system when inefficiencies are taken into account (1993) George, Anita. “Not so Sweet Refrain: Sugar-Sweetened Beverage Taxes, Industry Opposition, and Harnessing the Lessons Learned from Tobacco Control Legal Challenges.” Health Economics, Policy and Law, 2018, 1–27. doi:10.1017/S1744133118000178. German Lopez (December 2018), the case for raising the alcohol tax https://www.vox.com/future-perfect/2018/12/13/18130843/alcohol-taxes Goodwin; Nelson; Ackerman; Weisskopf (2009). Microeconomics in Context (2nd ed.) Hall, Robert E.; Lieberman, Marc (2009). Microeconomics: Principles & Applications. Cengage Learning. p. 42. ISBN 9781439038970. Institute of Applied Health Research, University of Birmingham (19 May 2017), Metabolically Healthy Obese and Incident Cardiovascular Disease Events among 3.5 Million Men and Women https://www.birmingham.ac.uk/news/latest/2017/05/'Healthy-obesity'-is-a-myth-study-suggests.aspx Jeffrey Grogger, Soda Taxes and the Prices of Sodas and Other Drinks: Evidence from Mexico (2016) Hon Jonathan Colemen. Mexican sugar tax- evidence of impact (2015) Health report no.20151086 https://www.bot.or.th/Thai/MonetaryPolicy/NorthEastern/Doclib_Seminar60/41_Paper_SugarcaneIndust.pdf Iski G. and Rurik I. The estimated economic burden of overweight and obesity in Hungary (August 2014) Johan den Hertog. Public and private interest in regulation (2003) Johan den Hertog. Review of Economics theories of the regulation (2010), https://www.uu.nl/sites/default/files/rebo_use_dp_2010_10-18.pdf

101

Jonathan Levin and Paul Milgrom, Introduction to the Choice Theory (September 2004), https://web.stanford.edu/~jdlevin/Econpercent20202/Choicepercent20Theory.pdf Jonathan S. Masur; Eric A. Posner, Toward a Pigouvian State, 164 U. Pa. L. Rev. 93 (2015) Joseph W.; Ludwig, David S. (15 October 2009). "The Public Health and Economic Benefits of Taxing Sugar-Sweetened Beverages.” New England Journal of Medicine. 361 (16): 1599–1605. doi:10.1056/NEJMhpr0905723 Kelly D. Brownell, Mark S. Gold (2012), Food and Addiction: A Comprehensive Handbook (2012) ISBN: 9780199908219 p.371 Kotakorpi, Kaisa and Härkänen, Tommi and Pietinen, Pirjo and Reinivuo, Heli and Suoniemi, Ilpo and Pirttila, Jukka, the Welfare Effects of Health-Based Food Tax Policy (November 14, 2011) Ludvig von Mises, Human action (1949) p.388 Ludwig van Mises, Internationalism: an economic analysis (1999), https://oll.libertyfund.org/titles/mises-interventionism-an-economic-analysis M.A.Colchero, Beverages Sales in Mexico before and after Implementation of a Sugar-Sweetened Beverage Tax (2016) Mark Orliztky, free market, https://www.britannica.com/topic/free-market Maximilian Tremme, Ulf-G. Gerdtham, Peter M. Nilsson and Sanjib Saha, Economic Burden of Obesity: A Systematic Literature Review (2017) Murphy SP, Cancer Research Center of Hawaii, University of Hawaii, The scientific basis of recent US guidance on sugars intake(2003), https://www.ncbi.nlm.nih.gov/pubmed/14522746 Nelson JP. Meta-analysis of alcohol price and income elasticities - with corrections for publication bias. Health Econ Rev. 2013;3(1):17. Published 2013 Jul 24. doi:10.1186/2191-1991-3-17 Novak, N. L. (2012, November 6). Role of Policy and Government in the Obesity Epidemic. the Rudd Center

for Food Policy and Obesity, p. 2345.

Ortún, V. (2016). TAX ON SUGAR-SWEETENED BEVERAGES IN SPAIN. Rev Esp Salud Publica. 2016 Oct

13;90:e1-e13, 1-2.

Paiboon Pitayatienanan. Economic costs of obesity in Thailand: a retrospective cost-of-illness study (2014), https://www.ncbi.nlm.nih.gov/pmc/articles/PMC4109797/

102

Parkin, Michael; Powell, Melanie; Matthews, Kent (2002). Economics. Harlow: Addison-Wesley p.77-79 Pearce, David W. (1992). Macmillan Dictionary of Modern Economics. Pearl Bader, d. b. (2011). Effects of Tobacco Taxation and Pricing on Smoking Behavior in High-Risk

Populations: A Knowledge Synthesis. MDPI.

Peeradet Detaum. Imposition of consumption tax for unhealthy food and beverages (2015) http://ethesisarchive.library.tu.ac.th/thesis/2015/TU_2015_5501034200_4224_3233.pdf Png, Ivan (1999). Managerial Economics. Blackwell. ISBN 978-0-631-22516-4. P.62 Professor Victor Fleischer. Curb Your Enthusiasm for Pigovian Taxes (2015) Rafeel Wittek. Rational choice theory (January 2013) Rising R, et al. Food intake measured by an automated food-selection system: relationship to energy expenditure. Am J Clin Nutr. (1992) Ruth S.M. Chan. Prevention of Overweight and Obesity: How Effective is the Current Public Health Approach (2010) Ruth S.M. Chan. Prevention of Overweight and Obesity: How Effective is the Current Public Health Approach (2010) Samuel M. Soref, the Doctrine of Reasonableness in the Police Power, 15 Marq. L. Rev. 3 (1930). http://scholarship.law.marquette.edu/mulr/vol15/iss1/1 Sawitri Assanangkornchai, Nisan Sam-Angsri, Sirinporn Rerngpongpan, Amata Lertnakorn, Patterns of Alcohol Consumption in the Thai Population: Results of the National Household Survey of 2007, Alcohol and Alcoholism, Volume 45, Issue 3, May-June 2010, Pages 278–285, https://doi.org/10.1093/alcalc/agq018 Seiler, Stephan, and Tuchman, Anna and Yao, Song. The Impact of Soda Taxes: Pass-Through, Tax Avoidance, and Nutritional Effects (May 1, 2019). Smirti Chand. Five factors which determine the price elasticity of demand http://www.yourarticlelibrary.com/economics/elasticity-as-demand/5-factors-which-determine-the-price-elasticity-of-demand/39062

Sousa, J. (2014, December). Estimation of price elasticities of demand for alcohol in the UK. UK: HM

revenues&customs.

The economic burden of obesity worldwide: a systematic review of the direct costs of obesity, Witrow, and Alter(2011), https://onlinelibrary.wiley.com/doi/full/10.1111/j.1467-789X.2009.00712.x

103

Thomadakis, S. B. (2007). Chairman, IFAC Council. WHAT MAKES GOOD REGULATION? 5.

Vanguardia. (2018, September 11). Retrieved from https://vanguardia.com.mx/articulo/24-millones-de-

mexicanos-padecen-obesidad-reporta-la-onu

Vinelli, Ryan. Sugar Taxes Are not Sweet: The Case against Taxes on Sugar-Based Drinks (May 26, 2009), https://ssrn.com/abstract=1410068 Wallis J., Dollery B. Market Failure and Government Intervention.

In: Market Failure, Government Failure, Leadership, and Public Policy. Palgrave Macmillan, London (1999)

William Glassor. Choice theory (1998) Witrow and Alter. The economic burden of obesity worldwide: a systematic review of the direct costs of obesity (2011), https://onlinelibrary.wiley.com/doi/full/10.1111/j.1467-789X.2009.00712.x Yot Teerawattananon. Obesity in Thailand and its economics cost, No.703 (2017) https://www.adb.org/sites/default/files/publication/236536/adbi-wp703.pdf p.11

Reports

Agency, E. (2011, September 26). Effectiveness of Regulation: Literature Review and Analysis, https://www.gov.uk/government/publications/effectiveness-of-regulation-literature-review-and-analysis Asia-pacific Tax Forum, ASEAN Excise Tax Reform: A Resource Manual

The Australian government, department of finance and deregulation, Influencing Consumer Behavior: Improving Regulatory Design p.6 Baker McKenzie, a Complete Guide to Regulations on Cryptocurrencies and ICOs in Thailand Bird, Richard Miller, Tobacco and Alcohol Excise Taxes for Improving Public Health and Revenue Outcomes: Marrying Sin and Virtue? (November 23, 2015). World Bank Policy Research Working Paper No. 7500. SSRN: https://ssrn.com/abstract=2695230 European Commission, health equity pilot project (HEPP)(2016), The impact of taxes on ‘junk food’ in Hungary Case Study Gillespie, Andrew (1 March 2007). Foundations of Economics. Oxford University Press. ISBN 978-0-19-929637-8.


104

Global agricultural information network, Thai Sugar annual report 2018, https://gain.fas.usda.gov/Recentpercent20GAINpercent20Publications/Sugarpercent20Annual_Bangkok_Thailand_4-12-2018.pdf

Government Gazette, book 135- 40 ง Grittner U, Gustafsson NK, Bloomfield K. Changes in alcohol consumption in Denmark after the tax reduction on spirits. Eur Addict Res. 2009; 15(4):216–223. doi: 10.1159/000239415 Obesity and Overweight, WHO(2018), https://www.who.int/news-room/fact-sheets/detail/obesity-and-overweight

OECD report (2012), (2014), (2017) Overweight rate went up to 33percent in men and 43percent in female, https://www.adb.org/sites/default/files/publication/236536/adbi-wp703.pdf p.4 Oxford economics (2016), the economics of soft drinks levy

Should We Tax Unhealthy Foods and Drinks? December 2015." https://studylib.net/doc/14264471/should-we-tax-unhealthy-foods-and-drinkspercent3F-de. Web. 19 May. 2019 Rob Preece, World custom journal, Excise taxation of non-alcoholic beverages in Thailand: products, approaches, rates, and administration (September 2012) Statista.com

Tax Policy Bureau, Fiscal Policy Office, Tax policy Journal (2017), http://www.fpo.go.th/main/getattachment/General-information-public-service/Tax-Policy-Journal/5304/CNT0018134-1.pdf.aspx

Thailand obesity information(2009),https://www.worldobesitydata.org/map/overview-adults#country=THA The BMJ press release, https://www.bmj.com/company/wp-content/uploads/2014/07/sugar-tax-mexico.pdf WHO, Guideline: Sugars intake for adults and children, WHO (2015) WHO, WHO data for mean of BMI in 2014 (2015) WHO, Global Health Observatory (GHO) data. Retrieved from world health organization(2016).

World Health Organization - Noncommunicable Diseases (NCD) Country Profiles, (2018) https://www.who.int/nmh/countries/tha_en.pdf?ua=1



105

Legislation

AVGIFT PÅ SUKKER MV.2017

Constitution of Kingdom of Thailand B.E. 2560

Ley Del Impuesto al Valor Agregado

Public Health Product Tax CIII Act/2011 (PHPT)

Thai Civil and Commercial Code

Thai Excise act B.E 2560

The U.S. constitution

Precedents

23 L.R.A. (n.s.) 766.

Case no. 4-21/2011[Panuwud translated]

Clean Air Act

Council Directive 2000/78EC

Ex Parte Quarg, 149 Cal. 79

Great Atlantic & Pacific Tea Co. v. Grosjean, 301 U.S. 412 (1937)

In United States v. Constantine, 296 U.S. 287 (1935)

McCray v. the United States, 567 U.S. 519 (2012)

National Federation of Independent Business v. Sebelius

Quong Wing v. Kirkendall, 223 U.S. 59 (1912)

Ruhstrat v. People, 185 Ill. 133.

States v. Kahriger, 345 U.S. 22 (1953)

Tolliver v. Blizzard, 143 Ky. 773, 137 S. W. 509

Website, articles, and blogs

Alexandra Beni, Shocking result: Hungarians are the fourth most obese nation in the world (26 May 2017), https://dailynewshungary.com/shocking-result-hungarians-fourth-obese-nation-world/

Alexandra sifferlin, Why BMI is not the best measure for the weight(or health)(2013), http://healthland.time.com/2013/08/26/why-bmi-isnt-the-best-measure-for-weight-or-health/ American Psychological Association. "Artificial Sweeteners Linked To Weight Gain." ScienceDaily. ScienceDaily, 11 February 2008. <www.sciencedaily.com/releases/2008/02/080210183902.htm>.

106

Block, J. P., & Willett, W. C. (2013). Taxing sugar-sweetened beverages: not a "holy grail" but a cup at least half comment on "food taxes: a new holy grail? International journal of health policy and management, 1(2), 183–185. doi:10.15171/ijhpm.2013.33 Body Fat Storage and Insulin: How They Affect Diabetes Management https://inbodyusa.com/blogs/inbodyblog/body-fat-storage-and-insulin-how-they-affect-diabetes-management/ Calories in Thai food (11 March 2013), https://health.kapook.com/view58233.html Carey Rossi, Is obesity a disease (Jun 24, 2013), https://www.prevention.com/health/a20454246/debate-is-obesity-a-disease/ Clean Air Act Overview, https://www.epa.gov/clean-air-act-overview/progress-cleaning-air-and-improving-peoples-health#pollution Doritos label, http://www.jemome.com/p-doritos-food-label-193184/ Economic Perspectives: The Efficiency of a Tax System. https://econperspectives.blogspot.com/2008/12/efficiency-of-tax-system-overview. 19 May. 2019 Encyclopedia Britannica, police power, https://www.britannica.com/topic/police-power Eric Chow, Southeast Asian sugar taxes: Bitter pills for better health (12 March 2019) https://asia.nikkei.com/Spotlight/Asia-Insight/Southeast-Asian-sugar-taxes-Bitter-pills-for-better-health Global price, https://www.globalprice.info/en/?p=norway/grocery-food-prices-oslo Government failure, https://www.economicsonline.co.uk/Market_failures/Government_failure.html https://dailynewshungary.com/no-more-need-for-soft-drinks-in-hungary/ https://home.kpmg/th/en/home/insights/2017/10/thailand-tax-updates-26october20170.html https://news.thaipbs.or.th/infographic/45 https://tobaccoatlas.org/country/thailand/ https://www.ameribev.org/files/resources/effects-of-the-mexican-soda-tax.pdf https://www.bobateadirect.com/bubble-tea-nutritional-info.html https://www.bot.or.th/Thai/MonetaryPolicy/NorthEastern/Doclib_Seminar60/41_Paper_SugarcaneIndust.pdf https://www.fooddrinktax.eu/wp-content/uploads/2018/07/IEPS_Why-the-STPS-to-soft-drinks-is-a-bad-idea_-1.pdf

https://home.kpmg/th/en/home/insights/2017/10/thailand-tax-updates-26october20170.html

https://news.thaipbs.or.th/infographic/45



107

https://www.hfocus.org/content/2016/04/12080 https://www.indexmundi.com/facts/thailand/smoking-prevalence https://www.lifeinnorway.net/norway-minimum-wage/ https://www.littler.com/mexico-approves-increase-minimum-wage-2014-geographic-zones-and-b https://www.myfooddata.com/articles/high-fructose-foods.php https://www.statista.com/outlook/20000000/139/non-alcoholic-drinks/hungary#market-volumePerCapita https://www.statista.com/outlook/20020000/126/soft-drinks/thailand#market-revenue https://www.statista.com/outlook/20030000/126/juices/thailand#market-arpu https://www.telegraph.co.uk/travel/maps-and-graphics/the-most-obese-fattest-countries-in-the-world/ https://www.thairath.co.th/news/business/1517020 https://ourworldindata.org/obesity#empirical-view https://www.pmc.gov.au/sites/default/files/publications/Influencing_consumer_behaviour.pdf

https://www.who.int/substance_abuse/publications/global_alcohol_report/profiles/tha.pdf International futures at the pardee center. http://www.ifs.du.edu/ifs/frm_CountryProfile.aspx?Country=TH Human rights and human dignity, http://www.constitutionalcourt.or.th/occ_web/ewt_dl_link.php?nid=1394 [Panuwud translated]

KANTAR World Panel, January-December 2014

Max Roser, Food per person Emperical view, https://ourworldindata.org/food-per-person Most obeses countries 2019, http://worldpopulationreview.com/countries/most-obese-countries/ Numbeo statistics

https://www.who.int/substance_abuse/publications/global_alcohol_report/profiles/tha.pdf

https://www.myfooddata.com/articles/high-fructose-foods.php

https://www.statista.com/outlook/20030000/126/juices/thailand#market-arpu

https://www.thairath.co.th/news/business/1517020

108

Human rights and dignity breach, http://www.thailaws.com/aboutthailaw/general_33.htm?fbclid=IwAR2J7aOmtnMCHTBko9aD01DBUnxxEvK01U9Qe6hjsOUPYJH3gL7zgXPAEFw International futures at the pardee center, http://www.ifs.du.edu/ifs/frm_CountryProfile.aspx?Country=TH Javier Rivas, Subsidies for healthy foods are a price worth paying to tackle obesity (March 2017), http://theconversation.com/subsidies-for-healthy-foods-are-a-price-worth-paying-to-tackle-obesity-74726 Jerry R. Balentine, DO FAC, Jerry R. Balentine, DO, FACEPP,Obesity(5/18/2018), https://www.medicinenet.com/obesity_weight_loss/article.htm#what_are_the_health_risks_associated_with_obesity KENTARO IWAMOTO, Southeast Asian sugar taxes: Bitter pills for better health KPMG, Ley del Impuesto al Valor Agregado, https://home.kpmg/xx/en/home/insights/2018/10/mexico-indirect-tax-guide.html Mark Tran, Obesity soars to 'alarming' levels in developing countries (Jan 3, 2014) https://www.theguardian.com/global-development/2014/jan/03/obesity-soars-alarming-levels-developing-countries Mark Hyman, MD, why fat doesn’t make you fat!(2016), https://drhyman.com/blog/2016/01/08/why-fat-doesnt-make-you-fat/ Max Roser, Food per person Empirical view, https://ourworldindata.org/food-per-person Mexico to Increase Minimum Wage for 2019 https://www.hklaw.com/publications/Mexico-to-Increase-Minimum-Wage-for-2019-12-20-2018/ Michael Matthews(2015), You’ll Stop Worrying About Sugar After Reading This Article, https://www.muscleforlife.com/sugar-facts/ Most obeses countries 2019, http://worldpopulationreview.com/countries/most-obese-countries/ Nick McDermott (2011), the festive coffee shop treats that contain more calories than a double cheeseburger. https://www.dailymail.co.uk/health/article-2069842/Starbucks-Costa-festive-treats-contain-calories-McDonalds-double-cheeseburger.html Numbeo statistics, https://www.numbeo.com/cost-of-living/city-history/in/Budapest?displayCurrency=EUR Obesity and Overweight, WHO(2018), https://www.who.int/news-room/fact-sheets/detail/obesity-and-overweight

109

Obesity Causes, Treatment & BMI - Medicine net https://www.medicinenet.com/obesity_weight_loss/article.htm. Web. 19 May. 2019. Obesity in Children https://www.samitivejhospitals.com/en/obesity-in-children/(Dec 18, 2017) Olivier Languepin, Thailand’s dangerous sugar addiction (5 November 2015) Overweight rate went up to 33percent in men and 43percent in female, https://www.adb.org/sites/default/files/publication/236536/adbi-wp703.pdf p.4 Open secrets, Top contributors-Lobbyists, https://www.opensecrets.org/industries/indus.php?ind=n01 Patrick Tyrrell, 8 Big-Government Policies That Hurt the Poor, https://fee.org/articles/8-big-government-policies-that-hurt-the-poor/ Prateek Agarwal, Intelligent economist, price elastic of demand (April 2019) https://www.intelligenteconomist.com/price-elasticity-of-demand/ Pediatric Obesity | Children's National. (n.d.). https://childrensnational.org/choose-childrens/conditions-and-treatments/obesity Purchasing power parity conversion factor for gross factor for gross domestic product, http://knoema.com/atlas/Thailand/topics/Economy/Inflation-and-Prices/Purchasing-power-parit Renew bariatrics, https://renewbariatrics.com/obesity-rank-by-countries/ Resurgence of measles in the US, https://www.hfocus.org/content/2019/02/16798?fbclid=IwAR15r31kWwnf6E7zpiOATPIPB-E2Kj1wTOzvmmqqQryYuqbLfECeSRfLGl0 Riviera Maya online grocery, http://www.rivieramayagroceries.com/product-category/water-and-beverages/ Rob Preece, World custom journal, Excise taxation of non-alcoholic beverages in Thailand: products, approaches, rates, and administration (September 2012)

Salt and sodium, https://www.hsph.harvard.edu/nutritionsource/salt-and-sodium/

Sarah Bloch-Budzier, Crossing border for a sugar fix, https://www.bbc.com/news/health-43245138 1 Should We Tax Unhealthy Foods And Drinks? December 2015." Insert Name of Site in Italics. Web. 19 May. 2019 https://studylib.net/doc/14264471/should-we-tax-unhealthy-foods-and-drinkspercent3F-de. Size thailand.org

110

Smriti Chand, 5 factors which determine the price elasticity of demand http://www.yourarticlelibrary.com/economics/elasticity-as-demand/5-factors-which-determine-the-price-elasticity-of-demand/39062 Sodexo, the social and economic cost of obesity in Latin America: a call to action https://www.sodexo.com/files/live/sites/com-wwd/files/02percent20PDF/Reports/201801-Latam-Obesity-Costs.PDF Stephanie Sacks, What the fork are you eating (2014), Sugar Asia Magazine, Sugar Reduction Trend Strong in Southeast Asian (24 April 2019), http://sugar-asia.com/sugar-reduction-trend-strong-in-southeast-asian/ Sugar Explained | Bbc Good Food, https://www.bbcgoodfood.com/howto/guide/sugar-explained Sugar tax, The Norwegian tax administration, https://www.skatteetaten.no/en/business-and-organisation/vat-and-duties/excise-duties/about-the-excise-duties/sugar/ Tax Law Changes Summary of the provisions of the summer tax package July 2018, Deloitte. https://www2.deloitte.com/content/dam/Deloitte/ce/Documents/tax-legal-highlights/august-2018/ce-tax-legal-highlights-hungary-august-2018.pdf Stanford health care, https://stanfordhealthcare.org/medical-conditions/healthy-living/obesity.html Sugar taxes around the world, https://www.abc.net.au/news/2018-01-07/sugar-taxes-around-the-world/9309516 Sugar tax, The Norwegian tax administration, https://www.skatteetaten.no/en/business-and-organisation/vat-and-duties/excise-duties/about-the-excise-duties/sugar/ Tax Policy Bureau, Fiscal Policy Office Tax rate 2019, https://www.regjeringen.no/no/tema/okonomi-og-budsjett/skatter-og-avgifter/avgiftssatser-2019/id2614443/ Tax rate 2019, https://www.regjeringen.no/no/tema/okonomi-og-budsjett/skatter-og-avgifter/avgiftssatser-2019/id2614443/ Tejvan Pettinger (June 1, 2018), Pigovian tax https://www.economicshelp.org/blog/glossary/pigovian-tax/ The regular price of orange juice per liter. https://www.tops.co.th/en/malee-navel-orange-1ltr-8853333010626, https://www.tops.co.th/en/malee-light-mandarin-orange-juice-1000ml-8853333015843 Thai Banks to tax savings interest above 20,000 THB, National News Bureau of Thailand (24 April 2019) Thai Monk suffers from Obesity https://aawsat.com/english/home/article/1394226/thailands-monks-suffer-obesity (13 September 2018)

111

Thai publica, where does the revenue from alcohol and tobacco go to? https://thaipublica.org/2017/09/sin-tax-who-is-the-big-one/ Thailand Thai Excise Department Implements New Sugar Tax, https://gain.fas.usda.gov/Recentpercent20GAINpercent20Publications/Thaipercent20Excisepercent20Departmen Thansettakij, Coup budget is still excessive (21 April 2019), http://www.thansettakij.com/content/399575 The rule of law, the Thai constitutional court, http://www.constitutionalcourt.or.th/occ_web/ewt_dl_link.php?nid=1283&fbclid=IwAR3gxH_Jp-8ceoaozhbRohWgfPiqtrCFUP-h1AyLa1QQu_tJ_Z-HGrwtgEw The rule of law, www.constitutionalcourt.or.th/occ_web/ewt_dl_link.php?nid=1283 The tax has raised revenue but HAS HAD NO EFFECT ON obesity, https://www.ameribev.org/files/resources/effects-of-the-mexican-soda-tax.pdf Types of sugar and their health effects(2014), https://www.hypervibe.com/au/blog/types-of-sugar-and-their-health-effects/ UK Essays, the difference between Coasean and Pigouvian Solution to an environment problem. UKEssays.com. 11 2018. All Answers Ltd. 05 2019 <https://www.ukessays.com/essays/economics/difference-between-coasean-and-pigouvian-solution-to-an-environmental-problem-economics-essay.php?vref=1>. University of California - Berkeley. "Three years into soda tax, sugary drink consumption down more than 50 percent in Berkeley: Taxes may be a promising new tool in the fight again obesity, cardiovascular disease, and diabetes." ScienceDaily. www.sciencedaily.com/releases/2019/02/190221172056.htm What kind of sugar is used for coca-cola, https://www.leaf.tv/articles/what-kind-of-sugar-is-used-for-coca-cola/ What the world can learn from Mexico’s tax on sugar-sweetened drinks http://theconversation.com/what-the-world-can-learn-from-mexicos-tax-on-sugar-sweetened-drinks-56696 Why people become overweight, Harvard health publishing (04/11/2017), https://www.health.harvard.edu/staying-healthy/why-people-become-overweight Wichet Tantiwanit https://voicetv.co.th/read/H1pwwmfqm?fbclid=IwAR3QjiKBOZjHeCRS7wBbq0YpSLgHyBnVCnjHq1i771mathzJ2kVhsvG-ezk (October 3, 2018) Will Kenton (May 2019), Behavioral economics https://www.investopedia.com/terms/b/behavioraleconomics.asp

112

Will Kenton, Price elastic of demand (November 2018) https://www.investopedia.com/terms/p/priceelasticity.asp World data https://www.worlddata.info/average-bodyheight.php

113

Annex

Annex 1

GI (Glycemic index) the indicator of fat store ability 319

The definition of the glycemic index is defined as follows

“The glycemic index (or GI) is an index of carbohydrates ranging on the scale from 0 to 100 according to

the ability to raise blood sugar (glucose) levels after eating. Foods with a high GI are those that are quickly

digested, absorbed, and metabolized and result in marked fluctuations in blood sugar (glucose) levels.”320

About Glycemic index

The high GI foods are, for instance, white rice, sugary drinks, candies, chocolates,white bread, etc. Low GI

carbohydrates are the ones that trigger smaller fluctuations in your blood glucose and insulin levels. When

it is consumed, the spike of sugar in the bloodstream or fat store process will not occur as the high GI

food. The lower GI the food is the lower chance of obesity, diabetes, or heart disease. It is also one of the

keys to maintaining weight loss. The low GI foods are, for instance, brown rice, oatmeal, wheat noodle or

pasta or whole wheat bread.

Annex 2

Types of Sugars and their effects

Sugar

Sugar generally refers to soluble sweet-tasting condiment, which is usually added into foods. Sugars are

available in many different forms and usually classified by their nature and chemical structures. Sugars

are naturally created during the photosynthesis by plants in the form of sucrose or as nectars in flowers

or as honey in the hives. The sugars which are added into beverages are usually fructose corn syrups.321

There are many forms of sugar which have different Glycemic index and the different level of health issues.

Glucose

319About Glycemic index https://www.glycemicindex.com/about.php 320 Id. 321 What kind of sugar is used for coca-cola, https://www.leaf.tv/articles/what-kind-of-sugar-is-used-for-coca-cola/

https://www.glycemicindex.com/about.php

https://www.leaf.tv/articles/what-kind-of-sugar-is-used-for-coca-cola/

114

Glucose is the most simple form of fuel that the body can use. Most of the time, the sugar that people

refer to in the context is glucose. Glucose is a monosaccharide, which is the smallest unit after the broken

down of carbohydrates(polysaccharide). When the carbohydrate is broken down into glucose, it will be

transferred in the bloodstream. The body then produces insulin the hormone which regulates the sugar

blood when it spikes. Then the sugar blood would be absorbed and turns to be energy. The excess amount

would be stored as fat. The glycemic index of glucose is 100, which is the highest number on the scale.

When the Glycemic index is high, that food is very easily broken down into sugar blood.322 Even if the

glycemic number of glucose is the highest, the taste is not as sweet as fructose and sucrose.323

Fructose

Fructose is the sugar which is commonly found in fruit, honey, sucrose, and high fructose corn syrup. It is

naturally very sweet, approximately 1.5 times of sucrose sweetness. Due to the sweetness it possesses, it

is usually used in soft drinks in the high fructose corn syrup(HFCS). The consumption of fructose emerged

skyrocket since the 1900s.324 Fructose can be quickly absorbed without triggering insulin, thus making its

GI around 19. It was once defined as the healthy sugar yet new researches started to find some arguments.

Unlike fructose, sweetener such as HFCS has a higher GI from glucose in the composition. Therefore, high

fructose corn syrup could perhaps be more harmful as glucose or more than glucose. It is traceable to the

increment of cardiovascular disease and type 2 diabetes. However, when anything is overconsumed, it

always poses negative impacts. When fructose is excessively consumed, the liver would not be able to

process it fast enough and instead, start to make fat in the bloodstream(triglyceride). The other effect

that was found by study was the increment of appetite. It can impair the body’s ability to use insulin and

ghrelin, the appetite-controlling hormone. With a moderate amount of consumption, it is a part of

balanced diet and poses no negative impacts.

Sucrose

Sucrose or as known as white sugar is a product of cane plant and can be ubiquitously found in households

and restaurants. It is a disaccharide made from glucose and fructose in an equal amount. The glycemic

index value is 65, which is relatively high. The fructose part makes it triggers insulin and blood sugar less

intensely than glucose. It thus can lead to diabetes when not consumed mindfully.325

322 Sugar Explained | Bbc Good Food. (n.d.). https://www.bbcgoodfood.com/howto/guide/sugar-explained 323 Id. 324 Id. 325 Id.

115

Lactose

Lactose is the form of sugar that is found in milk. It is disaccharide like sucrose but consists different

monosaccharides. It contains glucose and galactose units. It is broken down into 2 parts by enzyme called

lactase. As sucrose, the glucose part can elevate blood sugar. The glycemic value of Lactose is 41, which

is considered as low GI food. It has the nutritional value from the ability to stimulate the absorption of

minerals such as calcium, magnesium, and zinc. Some people, especially from Asia or Africa, might

have lactose intolerance, which is the inability to produce lactase enzyme that breaks down lactose. The

common issues which can be found are diarrhea, bloating, and other gastrointestinal symptoms.

Not all sugars are the same

It might be misunderstood by most people that sugars are all the same. In fact, they have different impacts

on our bodies. Glucose is transported to cells by insulin, and is used for energy production, is easy to break

down and to absorb. It is ideal in the situation that one immediately needs a dose of extra energy for

fueling an intense workout, for example, but when the glucose is not unused, it gets stored as fat.

Fructose, unlike glucose, is transported to the liver, so it doesn’t get stored as fat directly. However, this

doesn’t mean it is healthier. When insanely consumed, the liver can convert fructose to triglycerides,

which are fat molecules traveling through the bloodstream. Too high levels of triglycerides increase the

risk of heart disease and are eventually stored in the fat cells, increasing their size and contributing to fat

gain and weight gain consequently. Moreover, the unused triglycerides seem to affect the sensitivity to

insulin as well, increasing the risk of diabetes. Some studies suggest that elevated levels of these

molecules affect the abruption of minerals, weakening the immune system in the long run.

A few years ago, fructose was widely considered as the “healthy” sugar, due to its natural occurrence in

fruits and vegetables. This fact is not wrong, yet the fructose in fruits is low concentrated. Therefore, it’s

definitely not the same if you eat a piece of “diet chocolate” made with fructose, or an apple that provides

the same form of sugar.

Besides fructose and glucose, there are other types of sugar that are often found in natural and processed

foods as well, such as galactose, lactose, and maltose. Galactose is found in dairy products and milk.

Lactose is the main form of sugar found in milk and is made of galactose and glucose. Maltose is found in

barley.

116

Lactose gives about 40percent of milk’s calories and is broken down to glucose and galactose inside the

human body, so it does impact the blood sugar levels, but given that the organism has to split up this

sugar into its components, the absorption is slower than in case of glucose for example. The glycemic

index of lactose is, therefore, lower than the GI of glucose.

Among all of these forms of sugar, glucose titles as the most threatening one, but the others shouldn’t be

neglected either. Regardless of their name, they still contain calories and can add extra calories to our

diets and can impact the blood sugar levels, leading to an increased risk of diabetes and weight gain when

consumed at the inappropriate amount.326

Recommended sugar daily consumption amount by WHO (world health organization)

World health organization recommends reducing the intake of free sugars to less than 10percent of total

energy intake. 327

products which are potentially impacted by the sugar tax

1. glucose328

• grape juice

• energy drinks

• a sugary soft drink(soda)

• fast food(i.e., hotcake with syrup)

• Grapes

• Dried apricot

• honey

2. fructose329

• fruit juice

326 Types of sugar and their health effects(2014), https://www.hypervibe.com/au/blog/types-of-sugar-and-their-health-effects/ 327 Guideline: Sugars intake for adults and children, WHO (2015) “Total energy intake is the sum of all daily calories/kilojoules consumed from food and drink. Energy comes from macronutrients, such as fat (9 kcal/37.7 kJ per gram), carbohydrate (4 kcal/16.7 kJ per gram) including total sugars (free sugars + intrinsic sugars + milk sugars) and dietary fibre, protein (4 kcal/16.7 kJ per gram) and ethanol (i.e. alcohol) (7 kcal/29.3 kJ per gram). Total energy intake is calculated by multiplying these energy factors by the number of grams of each type of food and drink consumed and then adding all values together. A percentage of total energy intake is therefore a percentage of total calories/kilojoules consumed per day.” 328 https://www.myfooddata.com/articles/high-glucose-foods.php 329 https://www.myfooddata.com/articles/high-fructose-foods.php

https://www.hypervibe.com/au/blog/types-of-sugar-and-their-health-effects/

https://www.hypervibe.com/au/blog/types-of-sugar-and-their-health-effects/

https://www.myfooddata.com/articles/high-glucose-foods.php

https://www.myfooddata.com/articles/high-fructose-foods.php

117

• sugary soft drinks

• dried fruits

• fruits

3. sucrose330

• Dulce De Leche

• Milkshakes (Blended with Candy)

• Cake with Frosting

• Cran-Lemonade Juice Drink

4. Lactose331

• Milk

• Yogurt

330 https://www.myfooddata.com/articles/high-sucrose-foods.php 331 https://www.myfooddata.com/articles/high-lactose-foods.php

https://www.myfooddata.com/articles/high-sucrose-foods.php

https://www.myfooddata.com/articles/high-lactose-foods.php

The Effectiveness and Rightfulness of Tax on Sugary ... - http

Documents

Transcript of The Effectiveness and Rightfulness of Tax on Sugary ... - http