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December 2017 NUI Galway on RTE Brainstorm: What effect will the sugary drinks' tax have on obesity?
NUI Galway on RTE Brainstorm: What effect will the sugary drinks' tax have on obesity?
Tuesday, 11 September 2018
Opinion: the objective of the forthcoming tax is to reduce rates of childhood and adult obesity, but we don't have established evidence for the effect of such a tax in the long term
The coverage around the tax on sugary drinks in Ireland would have one think that the only recommendation from the Government Obesity Policy and Action Plan (2016-2025) was the implementation of a tax levy on sugary drinks. But in fact, the recommendation to develop a levy on sugar sweetened drinks (SSDs), due to come into effect in April 2018, was one of ten policies described in the action plan aimed at preventing overweight and obesity in Ireland.
This is not to say that the concerns raised by opponents of the tax are invalid. Some of these describe the lack of evidence to prove that the tax will reduce obesity, the likelihood that the tax will hit the poorest the hardest and the "substitution effect" where consumers will simply opt for another sugary food instead of the newly high priced drink. However, the core issues ought not to be about the effectiveness or otherwise of the sugar tax, but rather its ability to function as one component of an overall action plan towards obesity prevention. The causes of obesity are established as multifaceted and we now also need to accept obesity prevention policies to be multifaceted in nature.
The objective of the tax is to reduce rates of childhood and adult obesity in Ireland by reducing the consumption of SSDs as a contributor to health and dental deterioration, particularly among young people. We know that consumption of SSD is associated with obesity. We know that well designed taxes can be effective in discouraging consumption of these drinks. In Ireland one study predicted a 10 percent tax on sugary sweetened drinks would have a small but meaningful effect on obesity, in which the tax was predicted to reduce the obese adult population by 1.3 percent.
What we do not have is an established evidence base for is the effect of a SSD tax on obesity levels in the long term because the relative newness of these taxes internationally limits the existence of this data. Moreover, the scientific means to examine the direct effect of taxing SSD on obesity levels does not exist. Obesity is a complex problem with numerous causes and contributing factors at an individual and societal level. It can therefore be difficult to disentangle the effect of any single obesity prevention intervention.
However, some experts have urged that we evoke the "precautionary principle" and apply the intervention on the grounds that it is likely to have desirable effects and unlikely to do harm. It's a concept that is not unheard of, as seen in a recent ruling in Scotland regarding alcohol minimum unit pricing (MUP). The Scottish Whiskey Association contested MUP on the basis of a lack of empirical evidence that MUP reduced alcohol consumption. The court, though, ruled that there was no requirement on the Scottish Government to provide an evidence base for MUP.
If the tax would make a beverage 10 cents more expensive per can, consumers were only charged an average of four more cents per can
Consumer behavioural responses may fall into three broad categories: (i) he/she reduces consumption of SSD, producing desirable effects on health; or (ii) he/she increases the consumption of other sugar free soft drinks (fruit juices and dairy products are to be excluded from the tax on the grounds that they offers nutritional value) or (iii) he/she increases the consumption of alternative sugary foods or drinks. Manufacturers can also respond in one of three ways: (i) they can recoup costs by passing higher prices on to the consumer; (ii) they can reduce the sugar content in their products or (iii) they can increase production and promotion of less sugary drinks.
A US study examined the extent to which a tax on SSDs was passed onto consumers in the form of higher prices. It found that retailers only passed on about 43 percent of the SSD tax to consumers on average. If the tax would make a beverage 10 cents more expensive per can, consumers were only charged an average of four more cents per can.
If this tax is the "stick", we also need the "carrot"
No-one enjoys paying taxes and no politician relishes raising them. The SSD tax is likely to be regressive and take a larger percentage from low-income earners than from high-income earners as low-income earners tend to spend a greater proportion of their overall expenditure on SSDs. However, it does not seem logical to argue that because lower income earners consume more of something than higher income earners, we shouldn’t tax that consumption. That said, if this tax is the "stick", we also need the "carrot". In this case, this will come in the form of measures to encourage consumers to substitute taxed drinks with healthy alternatives and potentially reduce the regressive effects of the tax.
Ultimately, the effectiveness of the SSD tax will depend on how both consumers and manufacturers change their behaviour in response to the tax. Careful, evidence-based design and a clear understanding of the role of sugar taxes alongside other initiatives will help contribute to the design of effective policies in this area. This tax forms part of an overall multidimensional obesity action plan in Ireland and is just one measure in a suite of measures needed to tackle obesity prevention.
This article first appeared on the RTÉ Brainstorm platform. Visit here
Author: Dr Michelle Queally, J.E. Cairnes School of Business & Economics, NUI Galway
20 September 2018
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