GNWT holds sugar-sweetened drinks tax consultation

The GNWT held a public consultation about the proposed sugar-sweetened drinks tax in Yellowknife on Tuesday evening.

Similar sessions were held in Inuvik and Tuktoyaktuk earlier in the week, which along with an online survey, aim to collect the public’s input on the proposed tax. In the 2017-18 NWT Budget, the government committed to investigate introducing the tax to reduce sugar consumption and improve public health.

Sugar consumption is linked to obesity, diabetes and poor oral health, said Kelly Bluck, director of fiscal policy at the department of finance in her opening remarks.

“The health department has pointed out that obesity itself is linked to diabetes, cardiovascular diseases and some forms of cancer,” said Bluck.

Ten percent of hospitalizations in the Northwest Territories are related to diabetes, while the number one cause of hospitalizations for children under the age of five is oral health problems, she said.

Because of that, the health department is looking into the way the tax system can be used to discourage sugar consumption in the NWT and is working with the department of finance to do so.
The proposed tax would be on all sugar-sweetened drinks including non-diet carbonated drinks, ready-to-drink sweetened coffee and tea, energy drinks, sports drinks and fruit drinks with less than 100 per cent fruit juice. However, fountain drinks mixed with alcohol served at bars and restaurants would be exempt as well as 100 per cent fruit juices and flavoured milk and yogurt drinks.

“In some of our areas of course fruit juices are considered a food with nutrient value that we wouldn’t want to sacrifice because of the sugar,” said Bluck. “The health department tells us they really don’t have evidence whether diet carbonated drinks have long-term health effects and therefore, we would not be taxing them.”

In order for the tax to be effective, it would have to be high and visible to consumers, said Bluck.

“We know that taxes provide a price incentive,” she said. “What we don’t know is really how much of a price incentive it would provide up here.” Bluck pointed out that a 20 percent price increase in Yellowknife is only about a six or seven percent increase in more northern communities where food prices are already some of the highest in Canada. The proposed tax for drinks in pre-packaged containers are five cents per 100 mL or 50 cents per litre, while fountain drinks will be taxed at a flat rate depending on cup size, and range from 10 cents for less than 250 ml to 45 cents for drinks over 750 ml.

Under the Consitution, provinces and territories only have the authority to impose direct taxes on consumers, meaning they cannot levy the tax at the producer or importer level, but the federal government can.

“Which means there’s going to be a big impact on business because they’re going to have to be administering this tax,” said Bluck, which has been taken into consideration.

The effectiveness of the tax would be measured by how much consumers reduce their consumption of sugar-sweetened drinks. But even if the tax were implemented, measuring its effectiveness in the Northwest Territories would be difficult due to the lack of reliable existing data about consumption.

“Many sugar-based beverage taxes are recent, and there is not enough data to determine effectiveness; a long-term trend is also difficult to determine because of different factors affecting results,” a slide from the government’s tax proposal presentation states.

Marnie Bell from the NWT and Nunavut Public Health Association said she didn’t believe the tax alone will achieve the desired outcome.

Bell acknowledged that a lot of major health organizations such as the Heart and Stroke Canada, Canadian Diabetes Association, Childhood Obesity Foundation and the Canadian Cancer Society support the tax on sugar-sweetened beverages, and have even lobbied the federal government in favour of it.

“However I think it’s really important to note that all of these organizations believe that the taxation will generate revenue that can be diverted to healthy living initiatives such as subsidizing vegetables and fruits to make them more affordable, ensuring that there’s access to safe drinking water, ensuring that there’s a consistent and affordable milk supply in our Indigenous communities, providing healthy school lunches, introducing public education not just about nutrition but food literacy -- how to read labels, and food preparations and implementing physical activity programs as well,” she said.

Bell said the association is concerned that the government will not generate enough revenue on this tax to fund any of these kinds of programs. The current ballpark estimate for the tax revenue is $2.6 million said Bluck.

“We’ve taken a look at what we think is the consumption from our different companies about, we took consumption of containers, we compared it to our deposits, we looked at some of the StatsCan data, we looked at Senate data and then we doubled it for what we think fountain drinks will be, because we also want those to be taxed as well,” Bluck explained. “That is what we would call the gross amount from what we think the consumption is right now, times the tax. But then if we apply some kind of price elasticity then the tax comes down, and it might go as low as $2.1 million from that ballpark.”

However, the recently published discussion paper about the proposed tax states, “Although the tax will increase government revenues, the high administration required to implement this tax means this tax is not an effective tax to generate revenues.”

Bell also pointed out the fact that obesity is not caused by sugar consumption alone but is influenced by a variety of environmental, economic and socio-cultural factors.

“So the message is, addressing such an issue is very complex, and I don’t think taxation, in and of itself without trying to tackle the other issues that are facing people in the North, would be effective,” said Bell.
Food security, affordability and accessibility are already issues in the Northwest Territories, less so in Yellowknife than in the communities, and several people at the public consultation felt the proposed tax would only exacerbate that problem. And while many may cite the reduction of tobacco use in recent years as an example that taxation works, not only taxation was used to achieve that, said Bell. Public awareness and education campaigns over several years and the implementation of smoking bylaws helped create that change slowly over time. It’s worth noting that nationally, tobacco use still contributes to over 50 percent of total healthcare costs, with a price tag of $5.9 billion.

“Taxation is only one tool. We need to have taxation as part of a broader strategy if it comes into play at all,” said Bell.

Jim Goetz from the Canadian Beverage Association agreed with Bell’s statement that taxation isn’t the answer. Goetz was representing the national association as well as local companies like Yellowknife Beverages and Territorial Beverages.

“[These local businesses] recognize along with our association that obesity is obviously a problem and the issues that are associated with obesity are a problem, not just in the Northwest Territories but in Canada,” said Goetz.
The association worked with the territory to create its Balanced Choices NWT campaign. The “point of sale campaign” promotes public education by posting health information decals in stores in five Indigenous dialects as well as English. Goetz cited StatsCan data stating “Canadians get two percent of their calories from beverages, and when we talk about calories we are talking about sugar because that’s generally where calories come from in beverages.” Targeting such a small portion of calories with a tax is not going to tip the scale in terms of obesity, he said. “Unfortunately obesity rates are still increasing, but this is going to be onerous on businesses, on citizens [and] it’s not going to raise a lot of revenue by the government’s own recognition.”

Territorial Beverages owner Terra Pagonis echoed that sentiment.

“We think that the cost of living here in the NWT and doing business here is already expensive enough and that’s why we support education and not taxation,” said Pagonis.

Karen Boyd, regional executive director for Dietitians of Canada supported the tax saying it could work, especially when combined with other policies.

“As dietitians, we see the health effects of consuming excess sugar, fat and salt combined with sedentary lifestyles and the resulting obesity and chronic diseases,” said Boyd.
Often these people were not given the opportunity to develop healthy habits and lifestyles in childhood, she said. Boyd argued that the tax has been effective where it has been implemented, but said “current research” suggests a tax of at least 20 per cent of retail price is required to make a substantial difference in purchasing decisions.

“To be effective in the longterm, a tax must be implemented as part of a comprehensive approach that includes multiple strategies such as limiting the availability of sugary drinks in schools and other publicly funded institutions,” she said.

Although the tax is being offered as a potential solution to a public health issue, only representatives from the department of finance were present at the public consultation on Tuesday evening.

“What we really wanted to hear was what the public thinks about it and you don’t need to have a bunch of bureaucrats telling you this is what the problem is,” said Bluck.

“It should be pretty straightforward, and it is. We have sugar consumption we know it’s linked to obesity and bad oral health. We know that obesity is linked to a whole bunch of other health problems and we wanted to look for ways to reduce the amount of free sugars that we’re using. And this is one way to do it.”

To those that think this tax is a government cash grab, Bluck says take a look at the numbers.

“Don’t forget that this will be a very complicated tax to administer, which means that we’ll probably have to help businesses out to do it,” she said.

“We will not be getting that revenue off of it. It should be just by the sheer low volume of revenue that this is not a tax about raising revenues, and it’s not a tax grab. It’s about seeing if people in the public support the idea of using the tax system to achieve another social outcome, which is in this case, a positive health impact.”

The online survey about the sugar-sweetened drinks tax is open until February 25 at 5:00 p.m.

The findings will be summarized in a public report soon after the public engagement ends.