Sugar Tax Offers Health Benefits Worth 33 Billion Won, but Consumer Losses Reach 195.4 Billion Won

Cost-Benefit Analysis by Seoul National University and Other Researchers

"Industry Value Added, Employment,
and Consumer Welfare Losses Must Be Considered"

An analysis has suggested that imposing a sugar tax on sugar-sweetened beverages could result in greater costs—such as industry contraction and reduced consumer welfare—than the potential economic benefits associated with improved health. However, this analysis is based on the premise that the causal relationship between the consumption of sugar-sweetened beverages and chronic diseases remains statistically unproven.

On September 30, Professor Seokchul Hong of Seoul National University, Professor Dongyoung Kim of Kookmin University, and Professor Pyungsik Kim of Kyung Hee University presented the results of a study titled “Cost-Benefit Analysis of the Sugar Tax on Health and the Economy” at a forum hosted by Assemblyman Sanghoon Ahn at the National Assembly Members’ Office Building. The researchers estimated the health benefits, as well as industry and consumer costs, for three sugar tax proposals currently under discussion in the National Assembly. The research was carried out with the support of the Asia-Pacific Regional Group of the International Council of Beverages Associations.

The three proposals analyzed by the research team were those of Assemblywoman Sunmin Kim, Assemblywoman Sujin Lee, and a forum bill sponsored by Assemblyman Yoon Kim. Both Sunmin Kim’s and Yoon Kim’s proposals would impose a tax on beverages containing 5g or more of added sugar per 100ml, while Sujin Lee’s proposal covers a broader range of products. According to the analysis, the estimated decrease in consumption of the targeted beverages due to the tax was 5.01%, 1.80%, and 4.84% for each proposal, respectively.

The direct and indirect health benefits—including reductions in medical expenses and disease prevention—varied significantly depending on the analysis scenario. In the typical scenario based on point estimates from statistical models, these benefits were valued at 4.4 billion to 10.4 billion won per year; in an extremely optimistic scenario, the range rose to 20.5 billion to 33 billion won per year.

By contrast, on the industry side, the researchers estimated that the annual value added from beverage sales would decline by 60.4 billion to 126.1 billion won, and employment would fall by 889 to 1,854 jobs due to reduced demand for the taxed beverages. The consumer surplus loss was estimated at 50.7 billion to 195.4 billion won, and administrative and compliance costs were calculated at 400 million to 1.7 billion won.

The government's potential tax revenue was estimated at 61.3 billion to 232.4 billion won per year, depending on the version of the tax implemented. The researchers assumed that about 82% of the tax would be passed on to consumer prices. For Sunmin Kim’s proposal, government revenue was estimated at 198.5 billion won, with 162.7 billion won of that burden ultimately being borne by consumers.

The researchers also emphasized that the empirical evidence on the health effects of sugar-sweetened beverages is not sufficiently consistent. An analysis using the Korea National Health and Nutrition Examination Survey data from 2022 to 2024 on conditions such as obesity, diabetes, hypertension, hypertriglyceridemia, and dental caries found that, after controlling for demographic, socioeconomic, and health behavior factors, the statistically significant results were not consistently observed.

Additionally, the researchers highlighted that the amount of sugar consumed from sugar-sweetened beverages among major age groups decreased between 2016 and 2024. For individuals aged 19 to 64, daily sugar intake from these beverages declined from 10.8g to 7.9g, a 26.0% reduction. In light of this market-driven downward trend, the researchers suggested that the effects of price regulation should be re-evaluated.

Instead of a sugar tax, the research team proposed alternative policy measures such as encouraging companies to develop products with reduced sugar content, providing nutritional information, and offering dietary education through non-price policies.

This content was produced with the assistance of AI translation services.