Korea’s sugar tax debate fizzes over to drinks with sweetening substitutes

Korea’s debate over a tax on sugary beverages is taking a new turn: Zero-sugar beverages could be taxed, too, under a bill that would impose a levy not only on drinks containing sugar but also sugar substitutes.

Two bills seeking to impose levies on drinks containing added sugars such as sugar and syrup are pending in the National Assembly, according to the legislature and relevant government agencies on Sept. 17. The levy would vary depending on the amount of added sugar in each beverage.

Proponents of the bills argue the broader tax could help curb chronic disease and rein in health care costs, while opponents call it regulatory overreach to tax sugar alternatives.

Both bills followed a call by President Lee Jae Myung in January to consider a sugar levy similar to the tax on tobacco. Lee’s idea was to channel the revenue back into bolstering regional and public health care.

The model would mirror that of the so-called cigarette tax. In Korea, a 4,500 won ($3.25) pack of cigarettes carries about 3,300 won in taxes and levies, including the consumption tax and tax for promoting national health. Duties account for 73.8 percent of the retail price.

The issue has become more contentious as Democratic Party (DP) Rep. Kim Yoon, a former Seoul National University medical school professor, prepares a bill that would subject drinks with sugar substitutes to the levy alongside those with added sugar.

“We have been preparing the bill for some time and aim to introduce it by the end of the year after consulting a broad range of stakeholders,” an official from DP Rep. Kim’s office said.

Under Kim's proposal, drinks with five to less than 10 grams of added sugar per 100 milliliters (1.25 ounces per 12 fluid ounces) would face a levy of 250 won per liter (70 cents per gallon). Those with at least 10 grams per 100 milliliters would be charged 500 won per liter. For a 350-milliliter can of cola containing 37 grams of sugar, the levy would come to 175 won.

Two other bills by Rep. Kim Sun-min of the Rebuilding Korea Party and Rep. Lee Soo-jin of the DP that have already been submitted would set the levy at 105 won and 38.5 won, respectively. If the levy is passed entirely on to consumers in line with Rep. Kim Yoon’s concept, as much as 175 won could be added to the convenience-store price of a can of a soft drink — which is currently set at 2,200 won.

But the proposal by the med school professor-turned-lawmaker doesn't stop there. It allows a levy of up to 50 won per liter on beverages sweetened with sugar substitutes.

The idea is to curb demand for sweet-tasting drinks altogether and steer manufacturers toward low-sugar and unsweetened alternatives, DP Rep. Kim’s office argued. The revenue would fund research and development into low-sugar products and help manufacturers convert their production facilities.

“This is not about expanding tax revenue,” an official from the lawmaker's office said. “The aim is to reduce chronic disease by lowering sugar in beverages and strengthen the finances of the state health insurance system.”

The proposal, however, could face resistance before it clears the National Assembly. At the center of the debate is whether the levy is regressive, as lower-income consumers tend to drink more sugar-sweetened beverages and could bear a disproportionate share of the cost.

If a 330-milliliter sugary drink carried a 99 won levy under Rep. Kim Sun-min’s proposal, the annual burden as a share of income would be 8.4 times greater for the bottom 20 percent of earners than for the top 20 percent, according to an analysis by Noh Jeong-ran, a professor in Myongji University’s Department of Future Convergence Management.

Another challenge to the case for regulation is that Koreans are already consuming less sugar.

Average daily total sugar intake fell from 67.9 grams in 2016 to 59.8 grams in 2023, according to a public survey by the Korea Disease Control and Prevention Agency.

“The rise in demand for zero-sugar drinks shows that consumers are taking greater responsibility for their own health,” said Choi Cheol, a professor of consumer economics at Sookmyung Women’s University. “Regulating sugar substitutes as well would unduly restrict consumer choice, so policymakers need to closely examine the costs and benefits before moving ahead.”

The case for sugar taxes is less clear-cut when looking abroad.

About 116 countries had taxes on sugar-sweetened beverages last year, according to the World Health Organization. Of them, 85 covered drinks containing sugar substitutes.

In Britain, the average sugar content of taxed beverages fell 47 percent after the levy was introduced in 2018. Thailand’s experience was less pronounced. Prices climbed 11 percent, but consumers did not cut back by much.

The divergent results underscore the need for Korea to consider its own consumer culture and industry structure before deciding whether to introduce such a tax.

Concerns that the levy could fuel inflation and push prices higher have also made the government wary. “This would impose a burden on both companies and the public, so there needs to be sufficient public discussion first,” a government official said.

BY NAM SOO-HYOUN [[email protected]]