KUALA LUMPUR – February 12, 2019: Two economists have expressed their reservations over the success of the sugar tax on beverages to be imposed from April 1, stating that it all depends on how the industry and consumers react.
They also caution that the implementation may encounter problems.
Starting April 1 , a tax of 40 sen per litre will be imposed on carbonated drinks with more than five grams of sugar per 100ml as well as those of flavoured juices with more than 12 grams of sugar per 100ml.
The government had touted the tax as a way to promote a healthy lifestyle.
University Kebangsaan Malaysia Deputy Vice-Chancellor Professor Datuk Dr. Noor Azlan Ghazali said while the government’s intention may be pure, when it comes to the economy and taxes, the outcome can be quite uncertain.
“This particular tax is supposedly more about the government wanting people to reduce the intake of sugary beverages rather than to collect revenue. Thus how the people react will determine how successful this tax will be.
“If consumption is not reduced the tax can be considered a failure,” pointed out Azlan.
He also advised the government to be cautious and monitor the implementation and effects of the tax.
“We have inelastic and elastic products and we have yet to know how consumers will react to this tax. If it is anything like the tax on cigarette, illegal alternatives can surface.”
A product is considered elastic if a change in price quickly results in a change in the quantity demanded.
His opinion is echoed by Professor Zulkifli Senteri of Binary University, who said there are still uncertainties on whether sweetened beverages belong to the inelastic or elastic category.
Zulkifli reckons that if the industry decides to pass on most of the tax burden to consumers, Malaysians may expect a further price increase for set meals in fast food restaurants.