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IB Microeconomics IA
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Officially graded 13/14, IB Economics HL IA
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British Columbia adds tax to soda and sugary drinksBy Rachel Artur | 19-feb-2020
Carbonated beverages sweetened with sugar, natural or artificial sweeteners will be taxed in British
Columbia under the Provincial Sales Tax Act as of July this year.
The western Canadian province had previously granted carbonated beverages an exemption to the
Provincial Sales Tax Act, deeming it a ‘food product for human consumption’. As of July 1, however,
carbonated beverages sweetened with sugar – but also those using artificial sweeteners or even natural
sweeteners – will now be subject to the 7% tax.
For administrative ease, provincial sales tax will also apply to all beverages that are dispensed through
soda fountains, soda guns or similar equipment, as well as beverages dispensed through vending
machines (except those dedicated solely to coffee or water or similar).
The tax on carbonated beverages was announced in British Columbia’s Budget 2020 this week. “BC will
begin charging PST on sweetened carbonated drinks to help address the health and economic costs of
these beverages,” said Finance Minister Carole James.
“Research shows that teens between the ages of 14 and 18 are the top consumers of pop. This is a step
that health professionals and an all-party committee have long supported. “Because this is about
keeping young people healthy while taking in a bit of revenue to continue to pay for enhanced health
care services for everyone.”
The measure is expected to make $27m ($20m USD) in its first year and $37m ($28m USD) in 2021-2022
Source: Beverage Daily
COMMENTARY:
This commentary will cover the concepts of negative consumption externalities (NCE) and taxes,
applied to the scenario where British Columbia’s (BC) government imposed a 7% tax on Sugary
Drinks.
Sugary drinks are demerit goods because they have negative effects on people’s health,
therefore, are socially undesirable. The market for sugary drinks in BC is an example of a market
failure. In this case, it’s in the form of a NCE because the consumption of sugary drinks imposes
external costs on society as it leads to addiction, diabetes and obesity which mean higher costs
imposed on national healthcare and a loss of work productivity.
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