ANALYSING A TAX ON NEGATIVE EXTERNALITY : A case study of sugar tax in UK.

Abstract

The purpose of this report is to examine the effect of the newly implemented sugar tax in UK. How the recent introduced tax will affect the industries of food and sugary drinks. Therefore, the taxation types and theory will be explained in details before analysing the markets and industries.

This thesis consists a short introduction of the theoretical background. The elaborated theory will introduce definitions and the different views on the topic. Briefly it will explain why is important for government to intervene also the possible outcomes of this theory in practice.

Is important to note that this tax will affect consumers decisions, and not only the suppliers, as this is considered to be the aim of the government.

The sugar levy imposed in UK is trying to tackle two major health issues: obesity and diabetes. Sugar is one of the reasons behind so many diseases, and the number of people affected is raising. So the social costs of sugar consumption is analysed from the health point of view.

Due to time constraints in this research is used only secondary data. Secondary data was collected from UK law and government agencies, EU statistics agencies , and other reliable publications available (other sugar tax related theses, articles and recommendations).

After analysing the data and comparing how the sugar tax works in Finland , the conclusion part will focus to give an answer to these two questions: 1. Should this tax be introduced to European Union? 2. Did sugar tax meet the real market needs?

This research could be continued in future research under the topic of how taxes affect consumer behavior.