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The idea for a soda tax in Malaysia is not new, but it re-emerged in August after the government suggested that it was one among many proposals they were studying to increase tax revenue following the repeal of the Goods and Services Tax (GST).

A soda tax is a variation of the sin tax, and is designed to reduce consumption of sugar-sweetened drinks. Proponents of the policy argue that it is an essential tool in any national effort to combat the rising prevalence of obesity and type 2 diabetes. Five of our neighbours in ASEAN already have some form of tax on sweetened beverages in place. All of these countries share a common desire to address their own emerging health crises.

If a tax can generate new streams of income for the government while also reducing the health care cost associated with non-communicable diseases, what’s not to like?

Detractors point towards our experience with the tobacco tax. Smoking rates remain stubbornly high even though we have one of the highest tobacco taxes in the world. In the absence of strict enforcement, smokers turn to cheap contraband. As a result, more than half of all cigarettes smoked in Malaysia are illegally smuggled in.

Similarly, if we tax soda but lower the price of sugar—which the government recently did—what message is the government trying to convey? Other reservations include how “soda” should be defined; that it is a regressive tax which affects the low-income disproportionately; and that it is an expansion of the nanny state that infringes on individual liberties.

Taxing soda is not the only solution, and we are still figuring out whether it is the best. Alternatives include taxing sugar instead of drinks, attaching warning labels to products with high sugar content, as well as a more concerted campaign to educate consumers.

It is tough to change people’s habits, as Nobel Prize-winning economist Richard Thaler showed in his work. People don’t behave in a rational manner, or with their best interests in mind, all the time. Therefore, short of an outright ban, sodas will continue to be consumed in substantial amounts.

Continuing with the status quo will inflict further economic costs on society, due to the rise in non-communicable diseases. Working-age adults who would otherwise be healthy and productive are instead burdening hospitals and kept out of the labour market. However, what we do know is that preliminary studies looking into the efficacy of soda taxes around the world suggest it is working.

Ultimately, how do we change people's preference for sugar? No studies have been able to give us the answer to that just yet.

Listen to the podcast 'Do We Need A Soda Tax?':Editor's note: The 2019 national budget, tabled on 2 November 2018, states that a tax on certain sugar-sweetened beverages will be imposed starting April 2019. Read the analysis of this budget for more details on the tax.

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