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Taxing Soft Drinks

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Abstract

This paper reviews the practice of levying an excise tax on soft drinks in sub-saharan African countries, and evaluates this practice against theoretical norms for levying an excise tax. The question is whether such taxes are justified or whether they are discriminatory and impose a welfare cost on the country. The paper concludes that the sin tax justification does not hold for soft drinks, nor do income distribution justifications. Arguably the best reason for such a levy is revenue, but this argument is weakened by a higher price elasticity of demand than usually supposed.

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  • Roy Bahl, 2011. "Taxing Soft Drinks," International Center for Public Policy Working Paper Series, at AYSPS, GSU paper1106, International Center for Public Policy, Andrew Young School of Policy Studies, Georgia State University.
    • Handle: RePEc:ays:ispwps:paper1106
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    File URL: http://icepp.gsu.edu/files/2015/03/ispwp1106.pdf
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    1. Roy Bahl & Richard Bird & Mary Beth Walker, 2003. "The Uneasy Case Against Discriminatory Excise Taxation: Soft Drink Taxes in Ireland," Public Finance Review, , vol. 31(5), pages 510-533, September.
    2. Yacine Ait-Sahalia & Jonathan A. Parker & Motohiro Yogo, 2001. "Luxury Goods and the Equity Premium," NBER Working Papers 8417, National Bureau of Economic Research, Inc.
    3. Sean Campbell & Canlin Li, 2003. "Per Capita Consumption, Luxury Consumption and the Presidential Puzzle: A Partial Resolution," Working Papers 2003-18, Brown University, Department of Economics.
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