Question

The Australian Medical Association has proposed a national tax on sugar. A consumer advocacy group “Choice & Protection” is considering the position it should take on the tax proposal, and has commissioned you to prepare a report. Your terms of reference are:

“Provide a brief background on the rationale for the tax proposal and assess likely implications of a tax on sugar, including on:

Sugar consumption;

Consumer wellbeing (utility);

Potential impacts for different income groups;

Sugar production and the production and price of goods for which sugar is an input.

Based on the assessment, provide a recommendation on whether Choice & Protection should support or oppose the tax proposal.”

Answer 1

Ans :

As it is well eveident that sugar is a necessity kind of good that is consumed by people on regular day to day basis irrespective of their economic stature. However, putting tax on sugar would definetely impact a decrease in consumption pattern for financially unsound group of people who are able to afford just suffificient to feed themselves . The consumer utility would also decrease as the lower class people will not be well-off by this tax proposal. For different income groups. we will be facing a skewed change in demand pattern as for normal and above income people, such tax imposition would not lead to any drastic change in consumption pattern , but for those who already are consuming on bare minimum level may suffer. Besides, with this, sugar becomes costlier for all products that consumes sugar , so the production is expected to go down for the same.

Thereby, with all such facts in consideration, Choice & Protection should oppose tax proposal.